Corporate loan growth turns positive in FY22

The corporate advances by scheduled commercial banks have returned to growth path during financial year 2022.

According to Reserve Bank of India data, loans to large industries registered a marginal growth of 0.9 per cent during the financial year ended March 2022. In the previous financial year (FY21), there was a contraction of 2.5 per cent in corporate credit.

Individual data from major banks including State Bank of India, Punjab National Bank and Union Bank of India began the financial year with negative growth in corporate advances in the first quarter of FY22. However, there was a pick up from the third quarter onwards for many banks which ended the full year with increase in loans to large industries compared to previous year.

Corporate credit

SBI, for instance, has identified ‘strong growth’ in corporate credit as one of the drivers for its 11 per cent credit in FY22.  ``Corporate credit growth continues to trend upwards with an annual growth of 6.25 per cent at ₹24,01,761 crore (₹21,82,516 crore),’’ it said. Punjab National Bank too posted 5.4 per cent increase under corporate and other loans segment excluding loans to MSMEs.

“While increase in individual portfolios of few major banks is certainly welcome, the pattern of growth is uneven and there are some players, which are still hesitant to lend now in view recent change in policy stance of RBI. If RBI goes further tough on rates, it is likely to have an impact on credit demand for huge loans too,’’ a senior official of a major PSB told BusinessLine.

Key indicators

The economic activity indicators, as observed by SBI, have shown sequential improvement in petroleum consumption, electricity demand, two-wheeler and tractor sales, non-oil non-gold imports, capital imports, cement output, GST e-way bills, RTO revenue collections. Its Composite Index also recorded improvement in economic activity continues in the last quarter of last financial year.

Within industry, credit growth to ‘all engineering’, ‘beverage & tobacco’, ‘chemicals & chemical products’, ‘construction’, ‘food processing’, ‘infrastructure’, ‘mining and quarrying’, ‘petroleum, coal products & nuclear fuels and textiles’, among others has improved in FY 22 compared to FY21.

However, credit growth to basic metal & metal products ‘cement & cement products ‘glass & glassware’, gems & jewellery’ paper & paper products and wood & wood products decelerated/contracted, as per RBI data. 

Despite challenges, there are some positive drivers for corporate credit demand. “Given the bond market dynamics today, some corporates may migrate from bond market to bank credit. Further, working capital limits are also likely to go up,’‘ said Anil Gupta, Vice -resident,‘ ICRA.

COMMENT NOW