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SBI Ecowrap: Credit Growth is visible across sectors

NBFCs, Telecom, Petroleum, Chemical, Electronics, Gems & Jewellery and Infrastructure,including Power and Roads saw a visible growth in credit across sectors.

SBI Ecowrap: Credit Growth is visible across sectors
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NBFCs, Telecom, Petroleum, Chemical, Electronics, Gems & Jewellery and Infrastructure,including Power and Roads saw a visible growth in credit across sectors.

According to the State Bank of India's latest research report, which was released on Wednesday, stated that the third quarter of the current fiscal saw a visible growth in credit across sectors.

NBFCs, Telecom, Petroleum, Chemical, Electronics, Gems & Jewellery, and Infrastructure, including Power and Roads, are among the sectors where credit demand has begun to pick up in the recent three months, according to SBI's economic research report 'Ecowrap.'

"The incremental CD ratio beginning Q3 FY22 is currently at 133 as against the incremental CD ratio of only 2 during H1 FY22. Incremental deposits in the banking system has declined by Rs 2.2 lakh crore in this time period, whereas credit growth has picked up by Rs 3.5 lakh crore," the report stated.

The above-mentioned sectors mostly have big ticket disbursements, it said. Non-PSU credit demand is expected to outpace PSU credit demand in the fourth quarter, the report mentioned. Healthcare, commercial real estate, pharmaceuticals, infrastructure, NBFCs and construction will see the largest of such credit, it mentioned. Such credit is sought mostly by mid-rung entities, the report added.

According to a recent in-house survey, capacity utilisation has remained strong, with more than two-thirds of respondents suggesting current capacity utilisation of more than 70%. As many as 36%of respondents from sectors such as textiles, petrochemicals, and building materials indicated better utilisation levels.

"Intriguingly, the Commercial Paper (CP) issuances increased by around 40 per cent in the first nine month of FY22 indicating recourse to working capital requirement. However, bond primary issuances declined by more than 25 per cent during the same period. This indicates that the reverse credit flow from banks to bond market in FY21 is now on the wane as the deleveraging of corporates and substituting of high-cost debt with low-cost debt from the bond markets seems to have been largely completed," it said.

SBI Ecowrap also flagged Concerns over the current spike in Omicron cases which have slowed business activity. It warned that the SBI Business Activity Index has reached a two-month low.

"Most importantly, the capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) has touched a new peak of 16.6 per cent and their provisioning coverage ratio (PCR) too increased from 67.6 per cent in March 2021 to 68.1 per cent in September 2021 (excluding AUCA). This will remain a positive enabler for future credit growth," it concluded.

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