MUMBAI : Bank lending is estimated to have increased 6% year-on-year (year-on-year) in the June quarter of fiscal 22, largely in line with systemic credit growth and reflecting the underlying disruptions in the retail and small business sectors, analysts said.
Emkay Global analysts said channel checks and talks with bankers pointed to a stronger rebound in retail credit in the absence of a third wave of covid-19 and easing lockdowns.
“We estimate 9% overall credit growth for FY22 with a reasonable recovery in retail credit in the second half of FY22 and demand for back-end working capital from companies,” Emkay Global said in a statement. report July 9.
Given the less stringent lockdowns this time around unlike last year, analysts expect the overall bad debt build-up to remain moderate and will be partly offset by restructuring and government guaranteed loans. In the retail sector, stress remains high, mainly in commercial vehicles, personal loans, home loans, two-wheeler loans and microfinance, which should lead to higher stress formation for more banks. exposed to these segments, he said.
However, tensions among small and medium-sized enterprises could be largely removed through SWF-backed loans and debt restructuring.
“Within large companies, the Srei group could remain the norm due to the order of the National Company Law Tribunal (NCLT), while the restructuring of Shapoorji Pallonji and the proceeds from the sale of the UB group in favor of the dues of Kingfisher could be positive for some banks, ”he said.
The brokerage expects overall growth in operating profit before provisioning to be weak due to moderate growth in margins accentuated by recognition of bad debts, moderate cash support and lack of earnings important one-off events such as the takeover of Bhushan Power in the March quarter.
“The overall cost of credit could also be high due to the initial recognition of stress, partially offset by some use of the eventual provisioning buffer by some banks,” he said.
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