Synopsis: A significant surge in bank credit growth, reaching a ten-year high of 16% in the fiscal year. This growth is attributed to strong retail demand for loans, despite rising interest rates, and supported by corporate loan demand following a merger.
Bank credit growth surged to a decade-high of 16% in the fiscal year, propelled by robust retail demand despite escalating interest rates, and bolstered by corporate loan demand following the HDFC merger, according to RBI data.
In Kolkata, bank credit expanded by 16% during the past fiscal year, marking the quickest growth in the last ten years, indicating a heightened willingness among banks to lend, supported by improved financial metrics resulting from balance sheet restructuring.
The economic rebound from the pandemic, coupled with sustained strong retail loan demand, underpinned the accelerated credit expansion.
As per the latest weekly data from the Reserve Bank of India, bank loans increased by 16.1% year-on-year as of April 5, despite the prevailing higher interest rate environment. Factoring in the HDFC Bank merger, the growth rate rises to 19.9%.
While retail demand primarily drives credit growth, leading bankers note a simultaneous rise in corporate loan demand, particularly for private sector capacity expansion.
The regulator's assessment, drawn from the minutes of the recent monetary policy meeting, underscores buoyant business sentiment supported by robust investment demand and resilient economic activity, despite upward pressure on interest rates.
The Monetary Policy Committee remains optimistic about the outlook, citing anticipated increases in discretionary spending among urban households and improving income levels, which bode well for private consumption.
Expectations of a normal south-west monsoon are poised to support agricultural activity, while the manufacturing sector is forecasted to sustain its momentum on the back of continued profitability.
Aggregate bank deposits saw a year-on-year growth of 13.2%, climbing to 13.8% when factoring in the merger.
In conclusion, the surge in bank credit growth to a decade high of 16% reflects a robust economic recovery and strong demand for loans, both from retail and corporate sectors.
Despite challenges such as rising interest rates, the banking sector remains resilient, supported by improved financial metrics and systemic balance sheet cleansing.
The positive outlook for business sentiment, investment demand, and private consumption, alongside expectations for continued momentum in agricultural and manufacturing sectors, underpin a promising trajectory for the economy.
