 "Credit demand may be muted this festive season")
Credit demand might remain lacklustre this festival season, too, say bankers. Bank credit, though, had shown a marginal uptick in the festival season of the past two years.
Credit demand in the past few months has been hovering around 8.5-9.7 per cent. Though this might pick up in the second half of the season, bankers said they expect it to be only in the early double digits.
“Traditionally, credit demand picks up from October and so, we will see the same this year as well. But we do not expect any major pick-up overall, as demand from wholesale and business segments has been low,” said a public sector banker, requesting anonymity.
Though lenders have been witnessing credit demand from the retail segment, especially private sector banks, corporate lending has remained subdued. This kept credit growth to below 10 per cent in the previous two years.
A report by Kotak Institutional Equities said this low loan growth in the industry segment reflected there weren’t too many new projects to finance. And, it also showed banks were reluctant to lend to industry and infrastructure sectors; this, the report said, was likely to continue for the next few quarters.
However, bankers expect some improvement in credit demand, especially in the agriculture segment. “We have seen a good monsoon and, therefore, we can see some demand coming in from the rural areas that can fuel retail growth and the agri segment,” said N S Venkatesh, executive director, Lakshmi Vilas Bank.
Despite expectations of credit improvement in some segments, banks haven’t rolled out too many offers this year for the festival season.
The Kotak report said credit growth was likely to remain below 10 per cent in the medium term. There has not been any real sign of growth and that has kept expectations of credit growth low. Hopes that the investment cycle would come back might take some time to fructify. “A pick-up in investment may result in higher credit growth after three to four quarters; this, we highlight, has now been a rolling assumption for the past several quarters,” added the report.
Credit demand in the past few months has been hovering around 8.5-9.7 per cent. Though this might pick up in the second half of the season, bankers said they expect it to be only in the early double digits.
“Traditionally, credit demand picks up from October and so, we will see the same this year as well. But we do not expect any major pick-up overall, as demand from wholesale and business segments has been low,” said a public sector banker, requesting anonymity.
Though lenders have been witnessing credit demand from the retail segment, especially private sector banks, corporate lending has remained subdued. This kept credit growth to below 10 per cent in the previous two years.
A report by Kotak Institutional Equities said this low loan growth in the industry segment reflected there weren’t too many new projects to finance. And, it also showed banks were reluctant to lend to industry and infrastructure sectors; this, the report said, was likely to continue for the next few quarters.
However, bankers expect some improvement in credit demand, especially in the agriculture segment. “We have seen a good monsoon and, therefore, we can see some demand coming in from the rural areas that can fuel retail growth and the agri segment,” said N S Venkatesh, executive director, Lakshmi Vilas Bank.
Despite expectations of credit improvement in some segments, banks haven’t rolled out too many offers this year for the festival season.
The Kotak report said credit growth was likely to remain below 10 per cent in the medium term. There has not been any real sign of growth and that has kept expectations of credit growth low. Hopes that the investment cycle would come back might take some time to fructify. “A pick-up in investment may result in higher credit growth after three to four quarters; this, we highlight, has now been a rolling assumption for the past several quarters,” added the report.