Credit offtake accelerated at 17.9 per cent y-o-y, reaching a decadal high, reporting robust growth for the fortnight that ended October 07, 2022, says a report of CareEdge
It saw a massive 1,100 bps increase for the fortnight that ended October 07, 2022, due to a low base, retail credit, higher demand for working capital requirements amidst high inflation, and low funds raised in the capital market.
This also increased by 1.8 per cent from the immediate fortnight ended September 23, 2022. In absolute terms, credit outstanding stood at ₹128.6 lakh crore as of October 07, 2022, rising by ₹19.6 lakh crore over the last 12 months.
The growth has been on an upward movement with retail and wholesale contributing to the same. Retail credit growth has been strong due to underlying demand, as credit outstanding saw a robust growth at 19.5 per cent y-o-y in August 2022 driven by the miniaturisation of credit, housing, and vehicle loans.
Driven by ECLGS, MSME growth too has remained strong. Corporate loans indicate a shift from the capital market to bank borrowings as hardening bond yields have prompted companies to optimise their borrowing costs.
The credit outstanding of the industry segment registered a growth of 11.4 per cent y-o-y in August 2022 from 1.5 per cent in the year-ago period due to inflation-induced higher working capital demand. Credit for the services sector also accelerated by 17.2 per cent y-o-y in August 2022 from a growth of 2.1 per cent in the year-ago period primarily due to a rise in NBFCs and trade segments.
The credit growth is likely to remain elevated in the short term due to the ongoing festival season and inflation. Global inflation has remained high despite hawkish policies. This may lead to demand issues globally, causing second-order effects in India.
Deposits reported a slower growth at 9.6 per cent y-o-y. For the short-term rates, the Weighted Average Call Rate (WACR), too, has increased to 6.1 per cent as of October 14, 2022, from 3.25 per cent as of October 15, 2021. Deposits rates are expected to go up even further due to rising credit demand, widening credit deposit gap, ongoing festival season, lower liquidity in the market, and elevated inflation, said the report.