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FY22 credit growth crosses Rs 10 lakh cr, 1.8X more than FY21: SBI Ecowrap 

FY22 credit growth crosses Rs 10 lakh cr, 1.8X more than FY21: SBI Ecowrap 

The Ecowrap stated that incremental bank credit in incremental nominal GDP, which was as high as 63% in pre-pandemic FY19, plunged to a decade low of 27% FY22.

FY22 credit growth crosses Rs 10 lakh cr FY22 credit growth crosses Rs 10 lakh cr

FY22 saw an incremental credit growth at Rs 10 lakh crore, which is 1.8 times more than the growth of Rs 5.8 lakh crore in FY21. MSME and infrastructure credit was strong at Rs 2.3 lakh crore, while housing and NBFC was Rs 2 lakh crore, stated a SBI Ecowrap report. 

The report added that retail loans also expanded by a sharp Rs 3.7 lakh crore, which was driven by a surge in personal loans. Agricultural credit was at Rs 1.3 lakh crore. The Ecowrap report added that considering that there was credit growth across all sectors, it appears that the economy was able to shrug off the effects of the pandemic to a large extent.  

The increasing pattern in credit growth augurs well for FY23. “It is now evident that an expansion in public sector bank (PSBs) credit is crowding in credit growth from private sector banks (PVB). Once this trend turns into a self-fulfilling prophecy, the economy stands to benefit. Consider this, in FY22, the weighted contribution of PSBs in overall credit growth was as much as 43 per cent. This is a steady rise from the lows of 27 per cent in FY19. Simultaneously, the share of PVBs in credit growth has declined from 65 per cent to 47 per cent for the year ended FY22,” the report added.  

The Ecowrap stated that incremental bank credit in incremental nominal GDP, which was as high as 63 per cent in pre-pandemic FY19, plunged to a decade low of 27 per cent in FY22. A higher credit-to-GDP ratio signifies active banking sector participation, while a lower figure demonstrates the need for more formal credit. In FY23, share of bank credit may breach 50 per cent mark, which would indicate the increasing role of banks in economic growth.  

The report also highlighted that the inflation could dampen the impact of credit demand at a time the economy is seeing a turnaround. “However, we believe, a constellation of factors like significant weakening of growth prospects from China could act as favorable conduits of a not so aggressive pace of rate hikes by central banks around the world, including RBI,” it added. 

New investment announcements in FY22 are at an all-time high of around Rs 20 lakh crore, which 2X from previous year. Announcements from private sector too have recorded an all-time high of Rs 13.6 lakh crore, which is 2.5X from previous year. The share of private investment announcements has also increased to around 70 per cent in FY22 from 40-50 per cent last couple of years. 

The SBI Ecowrap also pointed out that despite such encouraging numbers, 64 per cent of the projects are also in the planning stage. “With the announcement from private sector at all time high coupled with PM Gati Shakti programme, which will break departmental silos, we expect the ratios to increase from here,” it added. 

Also read: Women participation in labour force pegged at 20.1% in Apr-Jun: SBI Ecowrap

Published on: May 02, 2022, 11:17 AM IST
Posted by: anwesha madhukalya, May 02, 2022, 11:08 AM IST