Credit growth in the banking system is picking up, helped by demand for loans to individuals during festivals, according to analysis by a rating agency.

Year-on-year (year-on-year) bank lending increased 180 basis points from last year’s level of 5.1% in the fortnight ended October 23, 2020. It is also about an improvement of 40 basis points compared to the previous fortnight.

In absolute terms, the credit draw has increased by 7.1 trillion rupees in the past twelve months and by 0.3 million rupees lakh compared to the previous fortnight.

The year-over-year increase reflects “the weak base effect, festival season spending and the easing of foreclosure restrictions in parts of India,” CARE Ratings said in a note.

Credit growth has remained lukewarm in the midst of the second wave of the pandemic, but after the easing of restrictions since June 2021, bank credit growth has gradually improved from 5.7% (fortnight of 04 June 2021) at 6.8% (fortnight of October 22, 2021)).

Overall growth in non-food credit continues to be driven by the retail and agriculture and related segments, but with the start of the holiday season, the retail segment has accelerated the credit growth.

“This hike was supported by rate cuts by banks to push retail lending as several banks are offering home loans at record interest rates before the holiday season, for example, in October 2021,” banks like PNB cut their benchmark key rate by 5 basis points to 6.50% and the Union Bank of India (UBI) reduced the interest rate on mortgage loans by 40 basis points ”, he added. declared CARE.

He expects 7.5% to 8.0% credit growth for FY22 with weak base effect, economic expansion, extensive ECGLS support (sanctions allowed until March 2022 and disbursements until June 2022) and a surge in retail credit.

“The medium-term outlook looks promising with less stress on businesses and increased provisioning levels in banks. The retail lending segment is expected to perform well relative to the industry and service segments, ”said CARE.

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