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Loans to mid-size Indian firms up most in a decade on cash surge

Loans to India’s mid-size businesses grew the most in more than a decade on the back of a surge in cash among lenders boosted by government stimulus.

That comes as a big relief to these cash-starved firms who have been struggling to keep their businesses afloat as the pandemic spread last year.

“Banks are keen to lend given the abundant liquidity,” said Avneesh Sukhija, an analyst at BNP Paribas. That along with emergency credit lines and an overall recovery in the economy is giving banks the confidence to lend to this sector, Sukhija said.

Bank loans to medium size companies in February rose 21% from the prior year, the most since 2010, to Rs 1.3 lakh crore ($17.8 billion), according to data published by the Reserve Bank of India on Wednesday.


Authorities in India have taken several steps to boost credit flow to this vulnerable segment that was badly hit as the coronavirus spread caused thousands of them to shutter shops.
Those measures include a government guaranteed emergency credit line of up to 3 trillion rupees to micro, small, and medium size firms that gave banks the confidence to step up lending without worrying about default risks. In addition, the RBI has provided to lenders regulatory exemptions for lending to this sector, liquidity and loan restructuring facilities.

Here’s a table from the RBI statement on loans to specific sector by banks in February:

SectorFebruary Credit (rupees)% chg y/y% chg m/m
Medium-Sized Businesses1.3 lakh crore212.3
Consumer Durables7,240 crore12-2.1
Housing14.4 lakh crore8.51.6
Vehicle2.39 lakh crore8.31.5
Shadow Banks8.96 lakh crore9.21.2
Real Estate Businesses2.32 lakh crore1.6-0.5
Agriculture & Allied Activities12.7 lakh crore100.5
Micro and Small Businesses3.77 lakh crore1.50.2
Credit Card Outstanding1.16 lakh crore4.8-0.1
Large-Sized Businesses22.8 lakh crore-1.50.1

With assistance from Anand Basu.

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