Banks report robust credit growth led by retail, SME segments

Banks in the private sector have registered robust credit growth at the end of December 2021 with continued demand from retail and SME segments.

Analysts believe that loan growth has been helped by festival demand and economic recovery, but warned that growth in the business segment would remain soft. The rising Covid cases may also dampen loan demand, but its impact would be limited.

“There has been a recovery in lending growth this quarter, with more banks under our coverage indicating 4-5 per cent growth on a sequential basis, and medium-sized banks such as Bandhan and AU Small Finance Bank reporting even stronger traction. This is driven by continued “traction in retail, both hedged and unsecured segments, revival in business banking and SME segments. President and Head, BFSI Research, Institutional Equities, Motilal Oswal Financial Services.

Lending growth

The banking sector will see an estimated lending growth of 7.7 percent for this fiscal policy and 11.8 percent for the next fiscal policy, according to Motilal Oswal Financial Services.

The increase in disbursements is also expected to increase earnings in the third quarter for banks.

“There is some uncertainty from the rising Covid cases and Omicron, but we expect it to have a limited effect as hospitalization is lower and the severity is milder,” he added.

On Wednesday, the private sector lender IndusInd Bank reported a 10 percent growth in its net progress to 2.28 lakh crore ₹ 31 December 2021 compared to ₹ 2.07 lakh crore a year ago. Net advances grew by three percent on a sequential basis.

“Retail deposits and deposits from small business customers amounted to DKK 1,13,615 million at 31 December 2021, compared with DKK 1,111,754 million at 30 September 2021,” it was stated in a stock exchange archive on Wednesday.

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Previously, the country’s largest private lender HDFC Bank reported a 16.4 percent year-on-year growth in advances to ₹ 12.6-lakh crore at the end of December 2021 compared to ₹ 10.82-lakh crore a year ago.

It reported a 13.5 percent growth in retail lending during December 31, 2020 and recorded the strongest increase in commercial bank lending of 29.5 percent compared to December 31, 2020.

The Federal Bank also reported a 12 percent growth in its gross advances to ₹ 1,43,633 crore on December 31, 2021 against ₹ 1,28,180 crore a year ago.

YES Bank recorded a 3.9 percent year-on-year growth in net advances to $ 1,76,422 per share. 31 December 2021. Gross retail advances in the third quarter of the financial year were ₹ 9,233 crore for the lender compared to ₹ 7,470 crore a year ago.

A recent report from CareEdge said that the outlook for bank credit growth is expected to be in the range of 8% for 2021-22 with a low base effect, economic expansion, increase in public and private investment (especially capex for renewable energy and production-related incentive schemes, extended ECLGS- aid (sanctions allowed until March 2022 and disbursements until June 2022) and retail credit promotion.

“The medium-term outlook looks promising with reduced corporate stress and increased cross-bank provision levels. However, the new coronavirus variant (omicron) could dampen momentum if local lockdown measures increase,” it added.

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