Festive season retail demand and MSMEs drive bank lending growth in October
Reflecting the surge in demand during the festive season, retail bank credit covering housing, vehicles and credit cards etc. increased by 11.7% on an annual basis (YoY) in October 2021, compared to 8.7% in October 2021.
Data from the Reserve Bank of India showed year-on-year growth in home loans was flat at 8.4% in October 2021, from 8.1% a year ago. Auto loans increased by 8.4%, compared to 5.7% during this period. The credit card segment posted a strong increase to 11.9% in October 2021 from 5.9% a year ago.
CS Setty, Managing Director (Retail and Digital Banking, State Bank of India, said that credit disbursement in the retail category has been good ahead of and during the festival season (Dussehra and Diwali). , comments from the field indicate credit demand has not fallen sharply in the post-festival period in November.
Economic momentum is higher in the third quarter of the current fiscal year (Q3FY22) than in the same quarter a year ago, when the economy was gradually emerging from the shock of the first wave of the Covid-19 pandemic. Ahead of the busy season that begins in October, the economy grew by 8.4% in the second quarter ended September 2021 (Q2FY22) compared to a sharp contraction of 7.4% in Q2FY21.
The drawdown of credit on the industrial segment also showed dynamism in parallel with the recovery of economic activity. Industrial credit growth fell to 4.1% in October 2021 from a contraction of 0.7% in October 2020, RBI said.
Size-wise, credit to micro and small industries accelerated to 11.9% in October 2021 from 0.7% a year ago. Programs such as the Government Guaranteed Emergency Credit have helped provide credit support to units in sectors battered by Covid-19.
The mid-size segment posted growth of 48.6% in October 2021, compared to 20.8% last year. Credit to large industries rose 0.5% in October 2021, from a contraction of 1.8% a year ago, it said.
Agriculture and related activities continued to perform well, recording accelerated growth of 10.2% in October 2021 from 7.2% in October 2020.
Services credit growth continued to slow, decelerating to 2.9. percent in October 2021 from 8.6% a year ago, RBI added.