Robust growth in bank credit

by Janaki Samant

Outstanding non-food credit disbursed by scheduled commercial banks (SCBs) increased by Rs.7.7 trillion during April-September 2022-23. This was the highest credit disbursed in the first half since 2019-20. During April-September 2019, outstanding non-food credit had showed an increase of Rs.10.7 trillion. This exceptionally high increase was because of change in coverage of non-food bank credit data from April 2019 onwards. If this statistical discrepancy is excluded, then increase in non-food credit during the first half of 2022-23 is at an all-time high.

Of the Rs.7.7 trillion increase in non-food credit in the first half, almost two-thirds, at Rs.5 trillion, was during the quarter-ended September 2022. July saw an increase in outstanding credit of Rs.2.3 trillion. And September recorded an increase of Rs.1.8 trillion.

The current fiscal year also commenced with an unusual increase in outstanding non-food credit in April. Past trend shows that outstanding credit normally declines in April and sometimes in May as well. This year, April and May witnessed an increase in outstanding non-food credit. Consequently, credit increased by R.2.7 trillion during the June quarter.

Increase in outstanding credit slowed to Rs.0.9 trillion in August after rising by Rs.1.3-2.3 trillion in the preceding two months. This had raised fears that high inflation and rising interest rates had adversely affected the demand for bank credit. However, outstanding non-food credit increased by Rs.1.8 trillion in September. Credit demand during the run-up to the festive season was not dampened by high inflation and interest rates.

The pick-up seen in credit demand in the first half of the current fiscal year, strengthened further with the beginning of the peak festive season. During the fortnight ended October 7, outstanding non-food credit increased by a whopping Rs.2.4 trillion. This was more than the credit disbursed during July, the highest monthly disbursal in the first half of the current fiscal year, at Rs.2.3 trillion. Navratri and Dussehra were celebrated during the fortnight ended October 7. Festive buying is likely to have boosted demand for bank credit. This sharp increase in outstanding credit indicates that spending during Diwali fortnight ending November 4 must have been equally robust.

During April-September 2022, outstanding personal loans increased by Rs.3.2 trillion. This was the highest-ever increase in the first half. Loans for housing, other personal loans and credit card outstanding were some of the categories of personal loans that recorded an all-time high increase.

Loans for housing increased by Rs.1.2 trillion during April-September 2022. This is more than the previous recent peak which was in April-September 2019 when housing loans had increased by Rs.0.95 trillion. Credit card outstanding increased by Rs.0.19 trillion, higher than the increase of Rs.0.1 trillion recorded during the corresponding period of 2018 and 2019. Other personal loans increased by Rs.1 trillion during April-September 2022.

Vehicle loans bucked this trend. They increased by Rs.0.47 trillion during the first half of 2021-22. This increase was lower than the increase of Rs.0.57 trillion recorded during the corresponding period of 2020-21.

During the first half of the 2022-23, outstanding credit to services sector increased by Rs.2.1 trillion. This is at an all-time high. Of this, Rs.1.5 trillion was in the September 2022 quarter. Wholesale trade, retail trade, NBFCs and other services are the major categories within services.

Outstanding credit increased by almost the same amount of Rs.0.23-0.26 trillion, each, for wholesale and retail trade during April-September 2022. This was the highest first-half increase. But their quarterly trend has been contrasting. A major chunk of the increase in credit to retail trade was in the September quarter. But, credit to wholesale trade increased more in the June quarter and slowed in the September quarter.

Bank credit to NBFCs increased by Rs.0.9 trillion during April-September 2022. This is lower than the all-time high increase of Rs.1.2 trillion recorded during April-September 2019.

Outstanding credit to agriculture & allied activities also increased at an all-time high of Rs.1 trillion during April-September 2022. During the corresponding period of the past 10 years, the highest increase of Rs.0.6 trillion was during 2016-17.

Bank credit to industry is seeing a revival after almost eight years. During the first half of 2021-22, outstanding credit to industry increased by Rs.0.9 trillion. In the corresponding period since 2014-15, credit to industry increased only during the first half of 2018-19, that too by a modest amount. In the first half of the rest of the years, it had declined.

Credit to micro & small industries contributed the most followed by large industries. Credit to micro & small industries increased by Rs.0.4 trillion whereas credit to large industries increased by Rs.0.3 trillion.

Increase in non-food credit of SCBs has turned out to be quite robust in the first half of the current fiscal year. Festive season consumption demand has provided an impetus to increase in credit offtake. It is remarkable that credit growth has accelerated during a period of rising interest rates. The up-tick in personal loans is particularly contrary to expectations

So far, the expectations were of further increase in interest rates. But, inflation has moderated and members of the Monetary Policy Committee have voiced opinions against further increases. It is therefore quite possible that interest rates, which has apparently not been effective in reining back credit growth, may not play a major role in the future growth of credit as well.

Note: The exceptionally high increase during April-September 2019 is because of change in coverage of non-food credit data as released in sectoral deployment of bank credit. Till March 2019, non-food credit data was based on 90 per cent of total non-food credit deployed by all SCBs. From April 2019 onwards, non-food credit data is from all SCBs.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
8.3 +0.7
Consumer Sentiments Index
Base September-December 2015
81.9 -0.2
Consumer Expectations Index
Base September-December 2015
81.6 0.0
Current Economic Conditions Index
Base September-December 2015
82.3 -0.6
Quarterly CapEx Aggregates
(Rs.trillion) Dec 21 Mar 22 Jun 22 Sep 22
New projects 4.04 8.60 4.88 3.53
Completed projects 2.86 1.32 1.18 1.33
Stalled projects 0.08 0.43 0.53 0.06
Revived projects 1.98 0.33 0.29 0.09
Implementation stalled projects 0.66 0.09 0.29 0.26
Updated on: 08 Dec 2022 8:28PM
Quarterly Financials of Listed Companies
(% change) Dec 21 Mar 22 Jun 22 Sep 22
All listed Companies
 Income 23.4 20.8 40.1 25.1
 Expenses 21.3 19.8 41.4 27.1
 Net profit 35.4 31.3 21.1 -3.0
 PAT margin (%) 9.0 8.8 7.2 7.7
 Count of Cos. 4,756 4,671 4,683 4,494
Non-financial Companies
 Income 29.3 24.8 50.1 27.8
 Expenses 28.8 25.7 52.9 31.5
 Net profit 19.2 9.8 8.3 -22.6
 PAT margin (%) 7.5 7.6 5.7 5.5
 Net fixed assets 2.0 3.9
 Current assets 15.0 19.3
 Current liabilities 11.7 10.8
 Borrowings 3.6 11.8
 Reserves & surplus 11.3 7.6
 Count of Cos. 3,439 3,387 3,414 3,330
Numbers are net of P&E
Updated on: 08 Dec 2022 8:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -0.9 25.8
 Expenses 0.4 -3.2 24.7
 Net profit -3.8 75.0 61.6
 PAT margin (%) 2.0 4.3 7.9
 Assets 9.0 9.9 9.9
 Net worth 4.7 12.0 14.2
 RONW (%) 3.4 6.8 11.8
 Count of Cos. 33,421 32,202 9,171
Non-financial Companies
 Income -1.1 -1.9 31.7
 Expenses -0.9 -3.9 31.5
 Net profit -20.4 62.2 60.2
 PAT margin (%) 2.2 3.9 6.9
 Net fixed assets 11.3 2.2 2.3
 Net worth 2.1 10.5 14.8
 RONW (%) 4.6 7.5 13.3
 Debt / Equity (times) 1.2 1.0 0.7
 Interest cover (times) 1.9 2.4 4.3
 Net working capital cycle (days) 82 88 55
 Count of Cos. 26,380 25,257 6,870
Numbers are net of P&E
Updated on: 05 Dec 2022 10:11AM