FY22 credit growth exceeds Rs 10 lakh cr, 1.8 times more than FY21: SBI Ecowrap

FY22 saw further credit growth at Rs 10 lakh crore, 1.8 times more than the growth of Rs 5.8 lakh crore in FY21. Credit to MSMEs and infrastructure was strong at Rs 2.3 lakh crore, while housing and NBFC were at Rs 2 lakh crore, an SBI Ecowrap report said.

The report adds that personal loans also increased by a crore of Rs 3.7 lakh, which was driven by an increase in personal loans. Agricultural credit was at Rs 1.3 lakh crore. The Ecowrap report added that, given credit growth across all sectors, it appears the economy may have largely ignored the effects of the pandemic.

The upward trend in credit growth bodes well for FY23. PVB). Once this trend turns into a self-fulfilling prophecy, the economy will benefit. Consider this, in FY22, PSOs’ weighted contribution to overall credit growth reached 43%. This is a steady increase from the lows of 27% recorded in FY2019. Simultaneously, PVB’s share of credit growth fell from 65% to 47% for the year ended FY22 “, adds the report.

Ecowrap said incremental bank credit in incremental nominal GDP, which was as high as 63% in pre-pandemic FY19, dipped to a low of 27% in FY22. A higher credit to GDP ratio signifies active involvement of the banking sector, while a lower figure demonstrates the need for more formal credit. In FY23, the share of bank credit could exceed the 50% mark, indicating the growing role of banks in economic growth.

The report also pointed out that inflation could dampen the impact of credit demand at a time when the economy is recovering. “However, we believe that a constellation of factors such as a significant weakening in China’s growth outlook could act as favorable vectors for a not-so-aggressive pace of rate hikes by central banks around the world, including including RBI,” he added.

New investment announcements in FY22 are at an all-time high of around Rs 20 lakh crore, 2X from a year earlier. Private sector announcements also hit an all-time high of Rs 13.6 lakh crore, up 2.5 times from the previous year. The share of private investment announcements also increased to about 70% in FY22 from 40-50% in the past two years.

The SBI Ecowrap also pointed out that despite these encouraging figures, 64% of projects are also in the planning stage. “With the announcement of the private sector at an all-time high coupled with Prime Minister Gati Shakti’s program, which will break down departmental silos, we expect ratios to rise from here,” he added.

Also read: Women’s labor force participation set at 20.1% in April-June: SBI Ecowrap