The twelfth round of the FICCI-IBA Survey was carried out for the period July to December 2020. A total of 20 banks including public sector, private sector and foreign banks participated in the survey. According to the survey, almost a year into the pandemic, economic recovery has started to gain momentum. High-frequency indicators show demand is holding up. The bank credit is also seeing improvement, as indicated by RBI's statistics.
The survey findings also show that long term credit demand has been growing for sectors such as Infrastructure, Pharmaceuticals and Food Processing. Particularly for the pharma sector, 45% of the respondents have indicated an increase in long term loans in the current round of survey as against 29% in the previous round. Better sectoral growth prospects have helped the credit uptake in these sectors. Infrastructure and Pharmaceuticals are expected to see an increase in long term credit even in the first half of 2021, as reported by 68% and 58% of respondents, respectively. Other sectors expected to see rise in long term credit include Metals, Iron & steel, Automobiles, Real estate and NBFCs.
The survey further states that the number of banks reporting tightening of credit standards during second half of 2020 has come down. 47% of respondent banks reported tightening of credit standards for large enterprises as against 68% in the last round. Likewise, percentage of banks reporting tightening of credit standards for SMEs has come down to 21% from 44% in the last round. In-fact, there has been a significant increase in respondents that have eased credit standards for SMEs, from 28% in previous round to 53% in current round.
The reasons cited for easing of credit standards are expectations of better growth going forward, reduction in their cost of funds and the need for providing Covid-19 relief to borrower. The credit standards are likely to remain unchanged in the first half of 2021, as reported by a large majority of respondent bankers. An uptick in CASA deposits has been reported by 70% of respondent banks in the current round of survey, similar to that reported in the previous two rounds.
The NPA levels for second half of 2020 have seen an improvement, with 50% of respondent banks reporting a decline in NPAs during current round of survey. Amongst the sectors that continue to show high level of NPAs, most of the participating bankers identified sectors such as Infrastructure, Metals, iron & steel, Real Estate and Engineering Goods. However, in terms of outlook, nearly 68% of respondent bankers expect the NPA levels to be above 10% in first half of 2021. 37% of respondents' expect NPA levels to be upwards of 12%. In the RBI Financial Stability Report, which was released in January 2021, under stress test under baseline scenario, GNPA could go up to 13.5% by September 2021.
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