Bank credit to industry in April grows fastest in 8 yrs

Bank credit to industry grew at its fastest pace in eight years in April 2022, showed sectoral data released by the Reserve Bank of India (RBI) on Tuesday. The value of loans deployed in the industrial sector — including large, medium, small and micro industry — grew 8.1% year-on-year (y-o-y) to `31.52 trillion as on April 22.

Credit to medium enterprises grew at the fastest pace of 53.5% y-o-y, while loans to micro and small enterprises grew 29%. Growth in the large enterprises segment lagged at 1.6%. Over the last two years, banks have increased their exposure to medium and small enterprises while implementing the government’s Emergency Credit Line Guarantee Scheme (ECLGS), aimed at supporting small business through the pandemic.

Of late, banks have turned aggressive in the MSME segment, hoping to cash in on the recovery being witnessed across sectors. Earlier this month, State Bank of India (SBI) chairman Dinesh Khara told investors that the bank expects to see stronger growth coming in the SME segment in the quarters ahead. “We have structurally strengthened our delivery process in SME in the last one year, so that should help,” Khara said, adding that the lender is still upgrading its processes. “So, that should help us in seeing better numbers in SME.”

ICICI Bank, too, has enhanced its focus on the small business segment. In April, the private lender launched a digital platform aimed at offering comprehensive business solutions to its SME customers, similar to what it offers for corporates.

Rakesh Jha, chief financial officer, ICICI Bank, told analysts after the bank’s Q4FY22 results that the bank is focusing on all aspects of its SME customers’ business. “So it’s not just about the loan, but also the float income on the current account side, FX and trade and all the other income that we get from the customers,” Jha said. The bank’s strong growth in the segment is the result of the investments it has made in technology for servicing the customers in this segment, he added.

Growth in the corporate segment has also been improving for most banks, with commodity price inflation and an improvement in consumption driving demand for loans. SBI’s corporate book grew 6.35% y-o-y during the quarter ended March, and the bank attributed it to good demand in the infrastructure segment.
However, much of the wholesale lending in the banking sector remains tied to working capital and capex-led demand is yet to become entrenched.

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