The outlook for bank lending growth is expected to be between 7.5% and 8.0% for FY22, due to a weak base effect, economic expansion, extended credit support from banks. emergency (ECLGS) and a surge in personal credit, according to CARE Assessments.
On a year-over-year basis, non-food credit growth stood at 4.9 percent in March 2021, up from 6.7 percent in March 2020, according to data from the Reserve Bank of India.
“The medium-term outlook looks promising with less stress on businesses and increased provisioning levels in banks. The retail lending segment is expected to perform well relative to the industry and service segments, ”the credit rating agency said in a report.
Second-quarter disbursements from some banks increase but overall loan growth has slowed
The agency estimated that the year-on-year bank credit growth rate increased by 160 basis points (bps) to 6.7% (fifteen weeks ended September 24, 2021) from the previous year’s level of 5.1% (fortnight ended September 25, 2020) and remained stable when compared to the previous fortnight.
“The year-over-year increase reflects the weak base effect and the easing of foreclosure restrictions in parts of India.
“In absolute terms, the loan draw has increased by ₹ 6.8 lakh crore over the past twelve months and by ₹ 0.5 lakh crore compared to the previous fortnight,” the report said.
Holiday season credit withdrawal
The agency expects bank lending to improve further in the next fortnight, driven by growth in the retail segment following the start of the holiday season and rate cuts.
“This hike should be supported by rate cuts from banks to stimulate retail lending, as several banks are offering loans at record interest rates before the holiday season,” the rating agency said. credit report.
For example, in September 2021, banks like Kotak Mahindra Bank and Punjab & Sind Bank reduced the 1-year loan rate based on MCLR / marginal cost of funds (based on mom) by 5 percentage points. base (bp) each, respectively.
In addition, to attract borrowers, several banks have reduced interest rates on home loans as a special offer during the holiday season – for example, State Bank of India, Bank of Baroda and Kotak Mahindra Bank cut their mortgage rates by 45 basis points, 25 bps and 15 bps, respectively, according to the report.