The State Bank of India’s latest research report, released on Wednesday, stated that the third quarter of the current fiscal saw a visible growth in credit across sectors. The SBI Ecowrap report said that the credit growth is visible across sectors like NBFCs, telecom, petroleum, chemical, electronics, gems & jewellery and infrastructure, including power and roads.
“The incremental CD ratio beginning Q3 FY22 is currently at 133 as against the incremental CD ratio of only 2 during H1 FY22. Incremental deposits in the banking system has declined by Rs 2.2 lakh crore in this time period, whereas credit growth has picked up by Rs 3.5 lakh crore,” the report stated.
The above-mentioned sectors mostly have big ticket disbursements, it said. The report also mentioned that demand from non-PSU credit is likely to outpace that of PSU credit in the fourth quarter. Healthcare, commercial real estate, pharmaceuticals, infrastructure, NBFCs and construction will see the largest of such credit, it mentioned. Such credit is sought mostly by mid-rung entities, the report added.
A recent in-house survey indicated that capacity utilisation has remained robust with more than two-thirds of respondents suggesting current capacity utilisation of more than 70 per cent. As much as 36 per cent respondents from sectors such as textile, petrochemicals, building materials indicated better utilisation levels.
“Intriguingly, the Commercial Paper (CP) issuances increased by around 40 per cent in the first nine month of FY22 indicating recourse to working capital requirement. However, bond primary issuances declined by more than 25 per cent during the same period. This indicates that the reverse credit flow from banks to bond market in FY21 is now on the wane as the deleveraging of corporates and substituting of high-cost debt with low-cost debt from the bond markets seems to have been largely completed,” it said.
The SBI Ecowrap also flagged concerns about the recent surge in Omicron cases pulling down business activity. SBI Business Activity Index has reached a two-month low, it cautioned.
“Most importantly, the capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) has touched a new peak of 16.6 per cent and their provisioning coverage ratio (PCR) too increased from 67.6 per cent in March 2021 to 68.1 per cent in September 2021 (excluding AUCA). This will remain a positive enabler for future credit growth,” it concluded.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today