Bank loans

Bank lending to industry: Bank lending to industry accelerates after 21 months

Bank lending to industries crossed the Rs 29 lakh crore mark for the first time in 21 months and stood at Rs 29.85 lakh crore at the end of December, with improving consumer and business confidence opening the door. path to a sustained economic recovery.

Major bankers expect the momentum to continue, with demand picking up and the government emphasizing infrastructure spending and capacity expansion.

The outstanding amount previously exceeded Rs 29 lakh crore at the end of March 2020, after which the disbursement of business loans slowed due to economic uncertainties caused by the pandemic.

Outstanding bank loans at Rs 29.85 lakh crore were 3% higher than at the end of March 2021, and 7.6% higher than a year earlier, according to Reserve Bank data of India. This expansion is largely due to increased disbursements to micro, small and medium-sized enterprises.

“The side effect of the third wave of Covid-19 on economic growth has been limited, most economic indicators are showing improvement which will likely boost consumer spending and encourage businesses to build up inventory and in turn to increase the demand for lending to industries,” Atul Kumar Goel, managing director of the National Bank of Punjab, told ET.

Fiscal initiatives like Gati Shakti driven by the seven engines of roads, railways, airports, ports, mass transit, waterways and logistics infrastructure will propel credit demand, Goel said.

Sectors that have already shown encouraging signs of credit growth are infrastructure, textiles, and chemical and chemical products, including fertilizers and food processing. Infrastructure loans increased by almost 11% year-on-year to reach Rs 11.4 lakh crore at the end of 2021, while textile loans increased by 11.8% to Rs 2.13 lakh crore. The chemicals and chemicals industry attracted 12.7% more loans at Rs 1.98 lakh crore.

“Bank lending to industries is expected to increase from now on as the economy has started to gradually emerge from the pandemic-induced stagnation,” said Shanti Lal Jain, chief executive of Indian Bank.

“The infrastructure boost as reflected in Budget 2022, the PLI (Production Linked Incentive) program for the manufacturing sector, the increase in demand, the increase in exports as well as the new announcements of acquisition of business groups should provide impetus to growth in banks’ lending book,” Jain said.

Banks are also on a steady footing to meet likely higher corporate credit demand. Goel said strong bank balance sheets with high levels of loan loss reserves, along with strong liquidity and capital position will complement the fiscal push for growth.