Money & Banking

Bankers’ sentiments on lending conditions improve vastly

Our Bureau Mumbai | Updated on December 24, 2020

New avenues NBFCs are increasingly adopting new strategies, including co-lending with banks, to grow their business skynesher

Retail loan demand saw maximum recovery, while infrastructure, mining and quarrying sectors showed mild optimism during July-September 2020

Bankers’ sentiments on lending conditions have consistently improved after the adverse situation witnessed during April-June 2020 due to the Covid-19 pandemic, according to an article in the Reserve Bank of India’s (RBI) latest monthly bulletin.

“The Covid-19 pandemic and related lockdown resulted in significant contraction in loan demand across all sectors during April-June 2020, which severely dampened sentiments among Indian banks.

“During July-September 2020, however, the loan officers’ sentiments recovered quickly, and the improvement was broad based,” the article said.

The authors, Vijaya Gangadaran and Supriya Majumdar of RBI’s Department of Statistics and Information Management, observed that infrastructure, mining and quarrying sectors recorded lower optimism than other sectors.

Retail/ personal loan demand was assessed to have posted maximum recovery after recording sharpest fall during the lockdown quarter (Q1:April-June:2020-21), they added.

“A comparison of the sector-specific NRs (net responses) indicates banks’ optimism on loan demand across sectors in July-September 2020, reviving from the low assessment reported in April-June 2020. Banks also expect improvement in loan demand during Q3 (October-December):2020-21,”the RBI officials said.

Net Response (NR) is weighted difference between the proportions of positive and negative responses. No change/similar’ responses are assigned zero weight


Loan Terms and Conditions

The article said Bankers 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 authors assessed that NRs for agriculture and personal loan segments have always been in the positive terrain indicating better loan terms and conditions in these sectors.

The sentiments on loan terms and conditions for services sector too indicated easing, barring the assessment during the lockdown quarter.

For infrastructure, mining and quarrying sector, however, more banks reported some tightening of loan terms.

A comparison of the sector-specific NRs (net responses) indicates bankers polled better loan terms and conditions across the board in July-September 2020, reviving from low assessment in the previous quarter, the authors said.

Bankers also expect further easing of ‘loan terms and conditions’ during Q3:2020-21, the authors noted in the article “Bank Lending Survey (BLS) - Recent Trends.”

BLS sample covers a panel of top 30 Scheduled Commercial Banks (SCBs) in India covering over 90 per cent of the total outstanding credit. It seeks a bank’s qualitative outlook for two-time points - assessment of the current quarter vis-a-vis the previous quarter and expectations for the ensuing quarter vis-a-vis the current quarter

Published on December 24, 2020

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