Bank lending is accelerating almost twice as fast as last year

Bank lending rose by double digits – 10% in the fortnight ending April 23 as the economy gets back on track after facing disruption from COVID-related lockdowns, nearly doubling the pace of 5.7% during the same period a year ago.

Bank credit outstanding stood at Rs 119.5 lakh crore as of April 23, up 10% year on year from 5.7% in the same period a year ago, according to the latest Reserve data. Bank.

The latest assessment of the economy by RBI economists acknowledges the recovery in bank lending which could help the economic recovery. “Bank credit has accelerated and the labor market is accelerating. There is an acceleration in the travel and hospitality sectors. The construction and real estate sector has also recorded a recovery” the state of the economy published in the last mentioned monthly bulletin.

Healthy economic growth and government fiscal support are expected to lift bank credit growth by 200-300 basis points to 11-12% this fiscal year according to ratings firm Crisil. The estimate takes into account the rating agency’s forecast of gross domestic product (GDP) growth of more than 7% for this fiscal year.

“The biggest difference we expect for this fiscal year is the rise in the corporate credit growth trajectory; we see it doubling to 8-9%,” said Krishnan Sitaraman, Senior Director and Deputy Head of Ratings, CRISIL Ratings. . “The Union budget pegs public capital expenditure at around Rs 7.5 lakh crore, a significant increase from last fiscal year, with one on public infrastructure. The downstream impact of this on key sectors , along with the announced Production Linked Incentive Program (PLI) for 13 key sectors, will drive this.Sectors expected to experience maximum growth, given their industry dynamics, include Metals and Chemicals. metals, chemicals, engineering and construction.

In its latest financial sector research note, ratings firm Icra said bank credit growth will come from credit growth in the non-food segment, which continues to be driven by the retail and food segments. MSMEs and partly through co-loan agreements with non-bank financial companies. . While the wholesale credit segment, growth will also be supported by the shift in debt capital market demand towards bank credit, in an upside yield scenario as seen over the course of the year. fiscal year 2019.

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