Friday 27 May 2022
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Indians borrowing more, saving not as much, also repaying debt

SBI Group chief economist Soumya Kanti Ghosh says that the importance of retail loans has increased for both private banks and public sector banks

The pace of bank credit growth hit 9.6% in FY22, up from 5.6% in FY21, even as deposit growth slowed to 8.9% the last from 11.4% in the year-ago period — indicating that Indians are borrowing more and saving less money. A Rs 1.8-lakh-crore surge in lending in mid-March helped banks add Rs 10.4 lakh crore to their loan books in FY22. This is almost double the Rs 5.8-lakh-crore growth registered in FY21.

The Reserve Bank of India (RBI) data show that the total bank credit stood at Rs 118.9 lakh crore as of 25 March, the last reporting Friday for the financial year 2022. This was a growth of Rs 1.8 lakh crore during the fortnight and Rs 10.4 lakh crore during the financial year, registering a year-on-year growth of 9.6%.

Bank deposits stood at Rs 164.7 lakh crore, which is an increase of Rs 1.9 lakh crore during the fortnight and Rs 13.5 lakh crore during FY22. The growth in bank deposits during the year was 8.9%.

The retail lending to Indians is driving the credit growth for banks. In wholesale, a part of the growth can be attributed to the switch from money markets to loans as the started withdrawing excess liquidity. Further, the surge in prices of commodities like oil has increased the for working capital.

Meanwhile, private sector banks are driving the recovery in credit, which accounted for a little over half of the credit growth (50.4%) with public sector banks contributing 44.7%.

A State Bank of India research report said, “Interestingly, retail loans have emerged as the main driver of bank credit in recent years and now have the largest share (30.5%) in the outstanding credit of all scheduled commercial banks, displacing industrial loans (28.9%). Within retail, housing loans have the largest share.”

SBI Group chief economist Soumya Kanti Ghosh says that the importance of retail loans for Indians has increased for both private banks and public sector banks. Because of subdued profitability and deleveraging by the corporate sector, banks moved their focus away from large infrastructure and industrial loans towards retail loans.

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