Bank credit in India expanded by a record Rs 7.3 tn in Q3 FY22. We estimate overall credit impulse to have jumped sharply to a 10-quarter high of 5.0 in Q3 FY22 from 3.1 in Q2 FY22.
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Jan 25, 2022
QuantEco Shots An impressive turnaround in credit impulse
Bank credit in India expanded by a record Rs 7.3 tn in Q3 FY22. We estimate overall credit impulse to have jumped sharply to a 10-quarter high of 5.0 in Q3 FY22 from 3.1 in Q2 FY22. This bodes well for increase in the investment ratio, which stood at 32.0% in Q2 FY22, similar to its pre pandemic level of 31.9% in H2 FY20. Notwithstanding the temporary mild risk from Omicron, hurdles for a further pick-up in bank credit are easing. The following to provide support in the coming quarters:
- Continuation of economic recovery in FY23 with likelihood of stability/mild improvement in banks’ asset quality
- Healthy corporate sector balance sheets post 3-4 years of deleveraging has improved credit appetite
- Government’s policy focus on boosting domestic manufacturing capacity (PLI Scheme) and investments (NIP/ Gati Shakti)
- Inflationary push for working capital requirement