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Bank credit growth robust for Q1; up 3.5% YTD vs. run-down in pre-covid years

Non-food bank credit for the fortnight ended 1st Jul’22 spiked 2% FoF (vs 17th Jun’22), up 15% YoY. Since Mar’22, growth has been >3.5% YTD. Bank credit sectoral deployment data for May’22 suggests YoY uptick across verticals: >16% in retail credit, 13% in services, 12% in agri, and >9% in industry. Incremental bank credit accretion in the past 12 months was Rs12.47trn, of which 49% was contributed by three components: housing (17%), MSME (17%), NBFC (15%). We believe India Inc, after undergoing a phase of deleveraging over the past few years, is now better positioned to embark on releveraging. Recovery in economic activity, derivative effect of increased investments and consumption may sustain the growth momentum of >12% CAGR over FY22-FY25E.

* We can expect the same to reflect in banks’ QoQ growth for Q1FY23E. Leading banks, whose business updates are not yet disclosed, may see 4-6% QoQ growth.

* FY23 YTD has been an exceptional year where credit has grown more than 3.5% in the first quarter itself vs run-down of 2-3% during Q1 in the pre-covid years. Historically, this kind of traction was visible in Q1FY11 (>4.5%) when system-wide growth for FY11 ended at >20%.

* Similarly, deposits too have grown 2.4% FoF registering 9.8% YoY growth.

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