India Inc Credit Demand Softens As Banks Witness Retail Boom
According to the sector-wise data available till September, the industries witnessed a surge in credits to 12.6 per cent year-on-year, along with small and mid-sized corporates recording stronger growth
With the sudden growth in retail credit, the corporates too have increased their credit demand however it still remains as half that of retail credit growth. The credit offtake boosted at 17.9 per cent on year-on-year, being a decadal high mark, reported a robust growth for the fortnight ending 7 October 2022.
The retail credit, higher working capital demand amidst high inflation, and lower funds raised in the capital market, drove the growth.
According to the sector-wise data available till September, the industries witnessed a surge in credits to 12.6 per cent year-on-year, along with small and mid-sized corporates recording stronger growth.
Due to the festive season, the retail credit demand almost doubled the corporate credit growth to 19.6 per cent year on year in September. In the industry cohort, credit to large industry went up to 7.9 per cent as against the contraction of 2.1 per cent from last year.
Whereas medium industries witnessed a credit growth of 36.2 per cent in September 2022 in comparison with 37.1 per cent from a year ago. The credit to micro and small industries also surged by 27.1 per cent against 13.1 per cent from last year.
In the past few years, Indian companies have deleveraged their balance sheets to a great extent by raising equity and refinancing high-cost debt. This has enabled banks who witnessed growth through retail lending route in recent years.
However, according to bankers, sectors such as cement, steel, renewable energy, roads, and chemicals, which are seeing some capacity creation, shows corporate demand the most. The companies optimised their borrowing cost due to hardening of bond yields, which led them to shift from the capital market to bank borrowings.