Double-digit jump in advances in Q4; retail lending leads, but corporate demand rising
Reflecting the recovery in the economy after two years of the Covid-19 pandemic, banks have seen a sharp jump in advances as at the end of 2021-22.
Ahead of their fourth-quarter results, many banks have released provisional data that show their advances surging in near-double-digits year-on-year by the quarter ended March 31, 2022.
A number of lenders have reported continued demand for loans, particularly from the retail segment, and noted that the third wave of the pandemic did not have much of an impact on economic activity.
Further, with most Covid restrictions relaxed, contact intensive sectors such as hospitality, travel and entertainment are seen requiring funds for re-opening and expansion.
Retail loans, which have been the focus for most lenders, continue to lead the credit growth, but corporate loan demand also seems to be picking up.
“Credit demand from the retail segment, and small and medium businesses has been strong, but with the economic recovery in full swing, there is a demand from other segments as well. Expectations are that credit demand from corporates, which had been largely muted, will also see an improvement this fiscal,” said an industry source.
Private sector lender HDFC Bank reported a 20.9 per cent growth in its total advances year-on-year by March 31, 2022. IndusInd Bank registered a 13 per cent increase in net advances to Rs. 2,39,307 crore in the same period. On a quarterly basis, IndusInd Bank’s net advances rose 5 per cent to Rs. 2,28,583 crore by December 31, 2021.
IDFC First Bank’s gross funded assets grew 12.8 per cent to Rs. 1,32,067 crore as on March 31, 2022 from Rs. 1,17,127crore a year ago.
Both Federal Bank and CSB Bank reported over 9 per cent growth in advances by March end on an annual basis. While Federal Bank’s gross advances rose by 9.5 per cent year-on-year to Rs. 1,47,644crore by March 31, 2022, CSB Bank reported a 9.1 per cent jump in gross advances to Rs. 15,998.02crore. Similarly, by the end of the fiscal year 2021-22, YES Bank’s net advances rose 8.8 per cent to Rs. 1,81,508crore compared to Rs. 1,66,893 crore as on March 31, 2021.
“Growth in advances benefited from two factors. The impact of the third wave of the pandemic on the economy was not as severe as that of the second wave. Also, a lower base would have led to normalisation of advances growth,” noted Sunil Kumar Sinha, Principal Economist and Director (Public Finance), India Ratings and Research.
The impact of the ongoing Russia-Ukraine crisis on the domestic economy is still being monitored and it could have some effect on credit demand also.
ICRA estimates that bank credit grew by 8.3 per cent in 2021-22 from 5.5 per cent in 2020-21. For the current fiscal, it has pegged bank credit growth at 8.9-10.2 per cent. “Banking credit growth would come from non-food segment which continues to be driven by retail and MSME segments; and partially by co-lending arrangements with non-banking finance companies,” it said on Tuesday.
Improvement in credit demand is also reflected in recent data from the Reserve Bank of India. For the fortnight ended March 11, 2022, credit offtake grew 8.5per cent.