INSUBCONTINENT EXCLUSIVE:
Credit to industries in September 2022 grew at the fastest pace it has grown in the last 100 months, aided primarily by a pick-up in working
capital loans from corporates.According to the latest sectoral deployment data of the Reserve Bank of India, credit to industries, which
accounts for 27.6 per cent of non-food credit, was up 12.6 per cent year on year to Rs 32.4 trillion
Nonthon month, it rose 1.4 per cent==the highest in seven months
On a year-to-date basis it was up 2.7 per cent.Apart from the base effect, credit to industry got a big boost from micro, small and medium
Credit to small and micro firms grew 27.1 per cent YoY and that to medium-sized firms grew 36 per cent
Credit to large industries grew 8 per cent YoY during the same period.Among sectors, petroleum, gems - jewellery, engineering, iron - steel,
and construction were the key drivers of industry credit growth, while food processing, cotton textiles (down 0.9% MoM) and roads (down 0.3%
And, there has been a shift from capital markets to banks for credit demand of industry
Inflation too has played a major role in propelling the credit demand from the corporate side
Lending to NBFCs has also picked up from last year
So, a combination of these factors is supporting the pickup in credit growth to industries
financial institutions, India Ratings and Research.Corporate credit growth is mirroring the overall credit growth seen in the economy
Suresh Ganapathy - Param Subramanian of Macquarie Research, unlike in the past cycles, credit growth this time around is very broad
Loans to industry and services sector have been strong and sectors like cement and steel which were seeing deleveraging have now been
consistently posting increasing credit growth
Going by the bounce rates data, the debit bounce rates are at the lowest level in the past ~4years indicating very strong asset quality
suggested that India Inc, after undergoing a phase of deleveraging over the past few years, is now better positioned to embark on
Recovery in economic activity, derivative effect of increased investments and spend on consumption may sustain the momentum of over 12 per
report.However, industry insiders suggested that sustainability of such high credit demand from the industry will depend on the economic
activity and there are some headwinds in that direction
Interest rates are fairly high, and they are likely to go up further
So, if the demand tapers, then such credit growth is difficult to sustain.
