Synopsis–According to the regulator’s analysis, demand for retail and personal loans was assessed to have posted the highest recovery.
Mumbai: Banks are witnessing a sharp upturn in demand for loans from individuals, a survey by the Reserve Bank of India has found. While demand for funds from industrial sectors is slow, bankers are less than optimistic about lending to the infrastructure, mining and quarrying sectors, according to the survey.
The Covid-19 pandemic and the lockdown had resulted in a significant contraction in loan demand across all sectors during the April-June period, which severely damped sentiment among Indian banks. The impact was seen on retail loans too, which halved in the first quarter of the financial year. But demand grew 25% from a year earlier by the end of the September quarter, and bankers anticipate the pace to accelerate to 30% in the December quarter.
As per the RBI survey, the loan officer’s sentiment recovered quickly in the September quarter.
According to the regulator’s analysis, demand for retail and personal loans was assessed to have posted the highest recovery.
Sentiment on Lending Improves
These loans recorded the sharpest fall during the April-June quarter. “Among major sectors, bankers have been generally expecting higher demand for retail/personal loans and agriculture segments in recent times, followed by manufacturing and services sectors,” the RBI noted in its survey.
Non-food credit growth of banks decelerated to 5.6% in October from 8.3% a year earlier, due to contraction in credit to industry.
The survey results reveal that there has been a broad-based improvement in bankers’ sentiment on lending conditions, after the severe impact of the pandemic during the June quarter.
Responses suggest that perceptions on retail and personal loans, which were most severely hit during the period, have also bounced back. The respondents expressed lower optimism for the infrastructure, mining and quarrying sectors when compared to other major sectors.
“Bankers also do not foresee sudden quarter-on-quarter change in loan terms and conditions; these are more dependent on performance of loans across sectors, macroeconomic conditions and opportunities for growth across sectors,” the regulator said.
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