Credit offtake of enormous cos hit, MSMEs acquire on ECLGS push

With the second wave of the Covid pandemic hitting corporates’ plans, credit score offtake by India Inc contracted by 0.3 per cent to Rs 28,67,304 crore by June 18, 2021 regardless of 5.9 per cent progress within the total non-food credit score offtake on a year-on-year foundation and a bunch of presidency schemes to revive the economic system. Credit offtake by the business had grown 2.2 per cent within the earlier yr.
The decline is because of 3.4 per cent contraction — or Rs 82,531 crore — in credit score offtake by giant industries to Rs 23,44,313 crore in the course of the 12 months ended June 18, 2021, as towards progress of three.6 per cent within the earlier yr, in keeping with the newest RBI information. Size-wise, credit score to medium industries registered strong progress of 54.6 per cent to Rs 147,875 crore in June 2021, in comparison with a contraction of 9 per cent a yr in the past.
According to the RBI, credit score progress to micro and small industries accelerated to six.4 per cent in June 2021, in comparison with a contraction of two.9 per cent a yr in the past. The rise in credit score offtake by medium and small industries is because of a bunch of presidency initiatives just like the Emergency Credit Line Guarantee Scheme (ECLGS) to deal with the financial downturn created by the Covid pandemic. “Corporates are now largely using the bond and equity mobilisation route for their fund requirements. Many have cut costs and sold off non-core assets to raise funds,” mentioned a senior financial institution official.
Personal loans registered an accelerated progress charge of 11.9 per cent in June 2021, in comparison with 10.4 per cent a yr in the past, primarily as a result of excessive progress in loans towards gold jewelry and car loans. Credit card excellent rose 5.3 per cent to Rs 1,02,757 crore from Rs 97,586 crore a yr in the past. However, card excellent declined by over Rs 13,000 crore within the final three months.
“Credit to agriculture and allied activities continued to perform well, registering an accelerated growth of 11.4 per cent in June 2021, compared to 2.4 per cent in June 2020,” the RBI mentioned.

Within business, credit score to meals processing, gems & jewelry, glass & glassware, leather-based & leather-based merchandise, mining & quarrying, paper & paper merchandise, rubber, plastic & their merchandise, and textiles registered excessive progress in June 2021, as towards the corresponding month of the earlier yr. However, credit score progress to all engineering, drinks & tobacco, fundamental steel & steel merchandise, cement & cement merchandise, chemical substances & chemical merchandise, development, infrastructure, petroleum coal merchandise & nuclear fuels and autos, car components & transport gear decelerated or contracted.
The RBI mentioned credit score progress to the companies sector decelerated to 2.9 per cent in June 2021, from 10.7 per cent in June 2020, primarily as a result of contraction in credit score progress to industrial actual property, NBFCs and tourism, inns & eating places. However, credit score to commerce section continued to carry out properly, registering accelerated progress of 11.1 per cent in June 2021 as in comparison with 8.1 per cent a yr in the past.

The latest further measures by the federal government to mitigate pandemic-related stress are anticipated to enhance credit score offtake. For occasion, further Rs 1.5 lakh crore of ECLGS disbursements would additional assist the financial institution credit score progress by offering further assist to MSMEs. A mortgage assure scheme of Rs 1.1 lakh crore to Covid-affected sectors is anticipated to enhance the credit score movement. If pending pointers incorporate factors on MFIs location, measurement, ranking, most mortgage quantity, then credit score assure scheme might incentivise lending to smaller MFIs together with rural targeted MFIs.
“The credit growth for FY22 is likely to remain in low double digit with growth expected in H2FY22 led by expansion in the economy and base effect coming into play,” mentioned a report by Care Ratings. The draw back dangers embrace restricted capex plans, decrease discretionary spending in comparison with pre-pandemic ranges, issues over third wave, partial/full lockdown in key states, which can affect the commercial in addition to service segments, it mentioned.