January 8, 2022 4:42:59 am
Credit demand is expected to pick up in the economy on account of growth in retail segments, better macroeconomic prospects and improving financial health of borrowers, Finance Minister Nirmala Sitharaman said on Friday in a review meeting with the heads of public sector banks.
Even as business outlook is progressively improving in spite of the headwinds from global development and Omicron spread, banks must strive towards supporting sectors that face interruption due to continued onslaught of Covid, she said. Sitharaman reviewed the performance of public sector banks with their chairmen & managing directors through a video link. Contact intensive sectors may require more support to help them fight against the pandemic, she noted.
In recent updates to stock exchanges, leading private banks reported credit growth of more than 10 per cent in December quarter.
The Finance Minister stressed that even as business outlook is progressively improving in spite of the headwinds from global development and Omicron, banks must strive towards supporting sectors that face interruption due to the pandemic.
After remaining sluggish for quite some time, credit growth to industry picked up to 4.1 per cent in October from a contraction of 0.7 per cent in October 2020. In absolute terms, outstanding credit to the industry rose by Rs 1.13 lakh crore on a year-on-year to Rs 28.54 lakh as of October 2021, according to the latest RBI data. This is largely aided by credit to medium industries which registered a robust growth of 48.6 per cent.
“During the review meeting, bankers pointed out that PSBs have observed an improvement in the repayment culture in the country…Bankers were confident that PSBs are adequately capitalised and banks are prepared for any stress scenarios in future,” as per a statement by the finance ministry after the meeting.
Public sector banks, led by State Bank of India, recorded net profit of Rs 31,145 crore for the first half of FY2021-22, just slightly below the full year profit of Rs 31,820 crore recorded in the previous full year. “PSBs recorded year-on-year credit growth of 11.3 per cent in personal loans, 8.3 per cent in agriculture loans and overall credit growth of 3.5 per cent, as on September 2021. Under Credit Outreach Programme launched in October 2021, PSBs have sanctioned an aggregate loan amount of Rs 61,268 crore,” the government said.
“Bank credit growth is showing signs of gradual recovery, although flow of credit to lesser rated corporates continues to be tepid. Signs of incipient stress in micro, small and medium enterprises (MSME) as also in the microfinance segment call for close monitoring of their portfolios,”
according to the RBI’s latest Financial Stability Report released last month.
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