But industry demand is driven mostly by large companies from last year’s contraction of 11 per cent for working capital due to rising input prices and not the much-anticipated capex.
On a year-on-year (y-o-y) basis, non-food bank credit grew by 18.3 per cent in October 2022, as against 6.9 per cent a year ago, according to the latest data on sectoral deployment of bank credit. An analysis of completed development loans between October 2021 and October 2022 indicates that the four segments, NBFCs, large corporate, business and home loans together account for 51 per cent or 95.5 lakh crore of the total Rs 18.8 lakh crore disbursed by banks during this period are of Rs.
Loans to service sector which mainly includes NBFCs, trade and credit commercial real estate to grow to 22.5 per cent (y-o-y) in October 2022 from 2.8 per cent a year ago, mainly due to improvement in credit to ‘NBFC’, ‘commercial real estate’ and ‘business’ sectors, the RBI said. Credit to NBFCs grew 38 per cent year-on-year in October, compared to 1.4 per cent in the same period a year ago. In absolute terms, loans to NBFCs were the largest with Rs 3.45 lakh crore, followed by home loans at Rs 2.54 lakh crore and large corporates at Rs 2.47 lakh crore.
Krishnan Sitharaman, Senior Director and Deputy Chief Ratings Officer, said, “As large NBFCs look to non-traditional segments to enhance yields, we are likely to see more partnerships such as co-lending with emerging NBFCs, which are unique focused on asset classes, especially unsecured loans.” , Crisil rating. “This allows large NBFCs to expand into new domains in a more cost-efficient manner while reducing time-to-market. For emerging NBFCs, it supports capital-efficient AUM growth.” Non-Banking Financial Companies (NBFCs) are expected to grow assets under management (AUM) by 13-14% in the next financial year, or double the pace of ~7% growth in the previous financial year (see chart in the annexure) because Strong credit demand piggybacks the ongoing economic rebound, according to Crisil.
Credit growth to industry accelerated to 13.6 per cent (y-o-y) in October 2022 from 3.3 per cent in October 2021. Size-wise, loan growth to large corporates grew by 10.9 per cent as against a contraction of 0.4 per cent a year ago. Medium industries reported credit growth of 31.0 per cent in October 2022 as compared to 35.1 per cent last year, while credit to micro and small scale industries grew to 20.4 per cent from 14.6 per cent a year ago.
The demand for working capital loans has increased due to increase in input cost. Corporates are turning to banks because overseas borrowing has become very expensive and if hedging costs are added, it has become even more expensive. “Corporate debt growth higher as foreign money and commercial paper become costlier” State Bank Of India Chairman Dinesh Khara in the economic conference of the bank. It will become more expensive if the rupee weakens further and market rates continue to rise.
Rating firms have also confirmed the increase in working capital loans. Global ratings firm Fitch said in a report, “We see bank credit expansion rising to around 13% in FY23 from 11.5% in FY12. will get.” “Higher nominal GDP growth, which we expect will drive demand for retail and working capital loans”.
Credit to agriculture and allied activities rose to 13.6 per cent (year-on-year) in October 2022 from 10.8 per cent a year ago.