Overall credit growth for the current financial year may remain in single-digit in the current financial year, though there will be improvement as compared to 2020-21.
A host of banks and financial institutions is raising funds from the market in March to fund their business growth and meet balancesheet targets before the end of the financial year.
Earlier this month, two public sector lenders — Union Bank of India and Canara Bank — raised Rs 1500 crore and Rs 1,000 crore by way of additional tier-I bonds as they see increase in credit demand. Another public sector lender Bank of Maharashtra is planning to raise Rs 1000 crore through the same route in March.
Among private sector lenders, HDFC – the largest mortgage financier – raised Rs 10,000 crore through 10-year bonds. ICICI Bank – the second-largest private sector lender raised Rs 8,000 crore via infrastructure bonds to finance projects in sectors such as transport and power and affordable housing. Can Fin Homes also raised Rs 700 crore while India Infrastructure Finance Company is planning to raise Rs 1,500 crore.
“We are seeing strong credit growth and that is one of the reasons why we raised money from the market,” said Keki Mistry, vice-chairman & managing director, HDFC Ltd.
“The demand for credit has been robust right through. Having said that, we do raise money from the market when the opportunity arises from time to time. The credit demand has been strong in both segments — retail and wholesale. And, we expect this trend to continue,” Mistry told Business Standard.
Bank credit growth, which was muted during the first nine months of the current financial year, showed signs of revival towards the end of December. According to RBI data, banks’ credit grew 7.9 per cent year-on-year till the fortnight ending February 11, as compared to 6.6 per cent in the year-ago period. Bankers said the credit offtake has further improved in end of February and March.
Overall credit growth for the current financial year may remain in single-digit in the current financial year, though there will be improvement as compared to 2020-21. Bankers expect growth to further improve in the next financial year in case there are no restrictions due to future waves of the pandemic.
“This year, public sector banks had a high call option on their tier-I and II bonds that were due. Hence, we are seeing a large number of issuances from the banks. Also, there is appetite in the market, given the yields are low and the AT1 bonds of PSBs are perceived to be high yielding and relatively safer instruments,” said Anil Gupta, vice-president & sector head – Financial Sector Ratings, ICRA.
“According to our estimates, the credit growth is expected to be in the range of 7.3-8.3 per cent in FY22 and it should further improve next year. The PSBs are well placed to fund this growth through internal accruals and may not require fresh capital unless the credit growth is in very high double digits,” Gupta added.
As demand for credit picks up as lenders rush to meet their year-end targets, coupled advance tax outflows by the middle of the month, banking system liquidity could tighten. The Reserve Bank of India on Tuesday conducted a sell-buy dollar-rupee auction, which also sucked out rupee liquidity from the system. As a result, money market rates have inched up. The overnight rate has moved up 25-30 bps in the last two trading sessions.