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Credit growth visible across sectors: SBI research report

Sectors such as healthcare, commercial real estate, pharmaceuticals, infrastructure, NBFCs and construction will be the prime beneficiaries of such non-PSU credit. Co-lending with NBFCs remains one of the most preferred options for lending as it also helps NBFCs churn their capital and offer on-lending at affordable cost, SBI said.

The December quarter witnessed a visible expansion in the credit growth across sectors, State Bank of India (SBI)’s economic research department said in its latest report. The incremental credit-deposit (CD) ratio beginning Q3FY22 is currently at 133, against the incremental CD ratio of just two during H1FY22, the report said.

Incremental deposits in the banking system have declined by Rs 2.2 lakh crore over this time period, whereas credit growth has picked up by Rs 3.5 lakh crore. Further, the deposit growth has been led by low-cost CASA deposits, far outpacing time deposits, as people preferred a precautionary approach amid continued uncertainties, the report said.

“Sectors where demand for credit started picking up during the last three months include NBFCs, telecom, petroleum, chemical, electronics, gems & jewellery and infrastructure including power and roads,” the report observed, adding that big-ticket disbursements have been seen in these sectors. “This, apart from our recent understanding of market participants, suggests that demand from non-PSU credit is set to outpace that of PSU credit in Q4FY22,” the report said.

Sectors such as healthcare, commercial real estate, pharmaceuticals, infrastructure, NBFCs and construction will be the prime beneficiaries of such non-PSU credit. Co-lending with NBFCs remains one of the most preferred options for lending as it also helps NBFCs churn their capital and offer on-lending at affordable cost, SBI said.

The report said its in-house industry survey suggests robustness in capacity utilisation, with more than two-thirds of respondents suggesting current utilisation level of more than 70% and 36% of respondents, from sectors such as textiles, petrochemicals and building materials, indicating better utilisation levels.

Issuances of commercial papers increased by around 40% in the first nine months of FY22, indicating increased working capital requirement, the report said. “However, bond primary issuances declined by more than 25% during the same period. This indicates the reverse credit flow from banks to the bond market in FY21 is now on the wane as deleveraging of corporates and substituting of high-cost debt with low-cost debt from the bond markets seems to have been largely completed.”

“Most importantly, the capital to risk-weighted assets ratio of scheduled commercial banks has touched a new peak of 16.6% and their provisioning coverage ratio too increased from 67.6% in March 2021 to 68.1% in September 2021 (excluding AUCA). This will remain a positive enabler for future credit growth,” the report said.

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