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Bank loans pick up at almost double the pace as last year

Bank loans rose in double digits – 10 per cent in the fortnight ending April 23 as economy is getting back on track after facing disruptions due to COVID related lockdowns, which is almost double th pace of 5.7 per cent in the same period a year ago.

Outstanding bank credit amounted to Rs 119.5 lakh crore as of April 23, up 10 percent year-on-year compared to 5.7 per cent in the same period a year ago, the latest Reserve Bank data indicates.

The latest assessment of the economy by RBI economists acknowledges the pick up in bank credit which could aid economic recovery. ” Bank credit has gathered pace and the job market is gathering steam. There is an acceleration in the travel and hospitality sectors. The construction and real estate sector have also registered a pick-up” the state of the economy published in the latest monthly bulletin said.

Healthy economic growth and budgetary support from the government should lift bank credit growth by 200-300 basis points to 11-12% this fiscal according to ratings firm Crisil. The estimate takes into accoun the rating agency’s forecast of over 7% gross domestic product (GDP) growth this fiscal.

“The biggest difference we expect this fiscal is the upshift in the corporate credit growth trajectory; we see it doubling to 8-9%” said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings. “The Union Budget pegs public capex outlay at around Rs 7.5 lakh crore, a significant increase over last fiscal, with sharp focus on public infrastructure. The downstream impact of this on core sectors, along with the Production Linked Incentive (PLI) scheme announced for 13 key sectors, will be the drivers. Sectors that should see the maximum growth, given their industry dynamics, include metals and metal products, chemicals, engineering and construction.”

In its latest research note on the financial sector, ratings firm Icra said that bank credit growth would come from non-food segment credit growth which continues to be driven by retail and MSME segments and partially by co-lending arrangements with non-banking finance companies. Whereas wholesale credit segment, growth will be also be supported by demand shift from debt capital market to bank credit, in a rising yield scenario as was seen in FY2019.

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