Mumbai: Bankers do not see the surge in inflation and interest rates hurting credit growth during the current fiscal year. Most banks expect credit in FY23 to grow in double digits, much faster than in FY22 when the pandemic impaired loan growth.
“Utilisation of limits in working capital loans has improved from 50% in the last quarter to 56%. Going forward, considering unutilised working capital limits, unutilised term loans and also the proposals in the pipeline, we have visibility of Rs 4-6 lakh crore of advances,” said State Bank of India chairman Dinesh Khara, while announcing the bank’s results on Friday.
According to Khara, the bank has undertaken a study which showed that the cost of funds for corporates varies from 8% to 15%, but more than the interest rates, the corporate’s performance is impacted by demand which determines production levels and capacity utilisation. “In inflationary conditions, it is to the advantage of the borrower whether it is corporate or retail,” he said.
Other banks also expect credit growth to be better than FY22, even if the RBI were to withdraw liquidity and raise interest rates. “We had a tepid growth in corporate loans last year, and growth was largely from retail, which grew 17%. We expect the fastest growth from retail and personal loans and auto loans to grow in teens. Corporate loan growth will be a bit lower, but I expect it to be better than last year,” said Bank of Baroda MD & CEO Sanjiv Chadha.
“When you look at the RAM (retail, agriculture and MSME) sectors, interest rates do not impact credit growth. Corporates have other avenues to raise funds, and there may be a bit of an impact if lending rates go up. But if interest rates rise across the board, I do not see a 50-100-basis-point (0.5-1 percentage point) increase having any impact on corporate demand,” said Union Bank of India MD & CEO Rajkiran Rai.
Punjab National Bank MD & CEO Atul Kumar Goel said that there is a good demand in steel and cement industries and a lot of road projects are coming up. “The last two years’ growth was different on account of Covid. We are of the view that in FY23, we should be in a position to achieve double-digit growth of 10%. We think that housing and the personal loan segments would grow around 15%,” said Goel.
Bandhan Bank, which has a large share of the microfinance business, has seen an improvement in collection efficiency with the ebbing of the pandemic. “We are now well on the revival path, and operating environment and the ground reality favour strong resurgence of business. I have made field visits and talked to people, and they are again coming back to credit demand. Collection efficiency has come to normal,” said Bandhan Bank MD C S Ghosh.