Bank credit recovers in 2021-22

by Janaki Samant

Demand for bank credit recovered during 2021-22 as the impact of the Covid-19 pandemic waned in the second half. Credit offtake had decelerated during 2020-21 on account of the pandemic-led slowdown in economic activity. Growth in outstanding credit disbursed by scheduled commercial banks (SCBs) accelerated to 9.6 per cent by end-March 2022 from 4.6 per cent as of March 2021. In absolute terms, increase in outstanding bank credit had dropped to Rs.4.8 trillion during 2020-21. During 2021-22, it surged by Rs.10.4 trillion. Of this, almost the entire increase, or Rs.9.3 trillion increase, was recorded in the second half as the first half was plagued by the more damaging second wave of the pandemic.

Increase in outstanding credit implies fresh disbursements exceeding repayments of past borrowings. Conversely, a decline in outstanding credit indicates that fresh borrowings were lower than repayments.

The increase in outstanding non-food credit was led by personal loans. Other broad segments of non-food credit such as services, industry and agriculture & allied activities also recorded an increase in outstanding bank credit during 2021-22.

Outstanding personal loans increased by Rs.3.7 trillion during 2021-22, the second highest increase since 2008-09. In fact, the second half recorded an increase of Rs.4.6 trillion in outstanding personal loans.

Loans for consumer durables, other personal loans, credit card spending, vehicle loans - all witnessed buoyant growth during 2021-22. Bank credit for consumer durables reached a high of Rs.103.5 billion. It had dropped to Rs.11.8 billion during 2020-21. Credit to the category ‘other personal loans’ almost doubled from Rs.1 trillion disbursed during 2020-21 to Rs.1.98 trillion during 2021-22. Credit card spending also picked up. It rose to Rs.166 billion during 2021-22 from the low of Rs.112.8 billion that it had hit during 2020-21. But it was still lower than the levels of Rs.200-300 billion recorded in the years prior to the pandemic-hit period.

Growth in outstanding vehicle loans improved to 9.4 per cent during 2021-22 from 7.7 per cent in the preceding year. The increase was despite the semi-conductor shortage that restricted production. The Russia-Ukraine conflict has further disrupted the supply chain. Vehicle loans are likely to see a slow recovery.

An exception to the broad-based recovery in retail loans was housing loans. These were increasing in the range of 13-19 per cent per annum for 10 years till 2019-20. The pandemic put an end to this double-digit increase and growth decelerated to 9.6 per cent during 2020-21. Despite interest rates on housing loans falling to an all-time low, growth in credit disbursed to this sector slowed further to 6.4 per cent during 2021-22. The current sharp increase in prices of construction raw materials and rising interest rates is likely to hamper demand for housing and, consequently, for housing loans, too.

Bank credit to the industrial sector had slowed since 2014-15. But 2021-22 witnessed a revival. During the year, outstanding credit increased by Rs.2.1 trillion. Growth accelerated to 7.1 per cent during 2021-22, the fastest growth in outstanding bank credit to industry since 2014-15.

The turnaround was mainly because of higher credit, net of repayments, disbursed to micro, small and medium enterprises (MSME). Credit to large industries did recover during 2021-22. Outstanding credit increased by Rs.210 billion during 2021-22 from a decline of Rs.627 billion during 2020-21. Again, a major proportion of the increase was in the second half. During this period, outstanding credit increased by Rs.1.75 trillion. It had declined by Rs.1.54 trillion in the first half. Disbursements to industry had yet to catch up with the quantum of Rs.2-3 trillion that was disbursed prior to 2014-15.

Increase in outstanding credit to MSMEs more than trebled during 2020-21 and 2021-22. From Rs.0.15 trillion during 2019-20, credit disbursed, net of repayments, increased to Rs.0.5 trillion during 2020-21 and further to Rs.1.9 trillion during 2021-22. The continuous increase in bank credit to MSMEs can be attributed to the Emergency Credit Line Guarantee Scheme (ECLGS). The scheme was introduced in May 2020 to improve credit flow to the MSME sector which was badly hit during the pandemic and subsequent lockdowns. In the Union Budget 2022-23, the scheme was extended till March 2023 and additional funds of Rs.500 billion was earmarked exclusively for the hospitality and related enterprises.

Outstanding bank credit to the services sector also revived during 2021-22 after slowing sharply in the preceding year. During the year, Rs.2.5 trillion was disbursed by banks to the services sector compared to the sum of Rs.0.8 trillion disbursed during the preceding year. Credit to NBFCs, wholesale trade and retail trade make up a substantial chunk of credit disbursed to the services sector. Outstanding credit to NBFCs increased by Rs.1 trillion during 2021-22 against the decline of Rs.0.01 trillion during the preceding year.

Disbursement of credit to wholesale trade slowed during 2021-22. After expanding by 18.3 per cent during 2020-21, growth in outstanding credit to wholesale trade slowed sharply to 7.3 per cent during 2021-22. In contrast, outstanding bank credit to retail trade had increased by 7.6 per cent during 2020-21. Growth accelerated further to 14.8 per cent during 2021-22.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
8.0 +1.3
Consumer Sentiments Index
Base September-December 2015
68.4 +0.8
Consumer Expectations Index
Base September-December 2015
67.6 +0.9
Current Economic Conditions Index
Base September-December 2015
69.7 +0.7
Quarterly CapEx Aggregates
(Rs.trillion) Jun 21 Sep 21 Dec 21 Mar 22
New projects 2.94 3.26 3.53 5.91
Completed projects 0.71 1.28 2.76 1.15
Stalled projects 0.33 0.28 0.06 0.30
Revived projects 1.14 0.39 2.07 0.28
Implementation stalled projects 0.64 0.26 0.65 0.07
Updated on: 25 Jun 2022 8:28PM
Quarterly Financials of Listed Companies
(% change) Jun 21 Sep 21 Dec 21 Mar 22
All listed Companies
 Income 42.3 27.5 23.4 21.6
 Expenses 41.8 26.7 21.3 20.5
 Net profit 140.6 55.3 35.4 32.8
 PAT margin (%) 8.9 9.6 9.0 9.1
 Count of Cos. 4,564 4,690 4,733 4,508
Non-financial Companies
 Income 61.1 35.7 29.1 25.9
 Expenses 62.4 36.0 28.8 26.6
 Net profit 195.2 59.5 19.0 12.9
 PAT margin (%) 8.4 8.8 7.5 7.9
 Net fixed assets 4.9 2.2
 Current assets 10.8 15.3
 Current liabilities 0.8 11.7
 Borrowings 12.1 3.7
 Reserves & surplus 12.4 11.5
 Count of Cos. 3,336 3,387 3,428 3,280
Numbers are net of P&E
Updated on: 25 Jun 2022 8:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -1.1 13.6
 Expenses 0.4 -3.4 10.5
 Net profit -4.4 72.2 58.0
 PAT margin (%) 2.0 4.5 10.9
 Assets 9.0 9.7 9.3
 Net worth 4.8 11.7 9.9
 RONW (%) 3.4 6.9 13.5
 Count of Cos. 32,455 29,998 539
Non-financial Companies
 Income -1.2 -2.3 26.3
 Expenses -1.0 -4.4 25.6
 Net profit -20.8 63.5 42.2
 PAT margin (%) 2.2 4.2 13.8
 Net fixed assets 11.2 2.0 -1.9
 Net worth 2.2 10.7 11.2
 RONW (%) 4.7 8.0 22.6
 Debt / Equity (times) 1.2 1.0 0.3
 Interest cover (times) 1.9 2.5 10.3
 Net working capital cycle (days) 81 85 16
 Count of Cos. 25,743 23,675 386
Numbers are net of P&E
Updated on: 20 Jun 2022 11:46AM