Incremental credit growth hits 13-year high in August 2022, says CareEdge

Rating agency CareEdge in its latest report on bank credit said that incremental credit off-take rose by 4.8% in August 2022, aided by housing, vehicle, NBFCs and petroleum- based sectors. It is the highest growth reported in the last thirteen years (compared with only August period data) and also after a negative growth for three years, according to CareEdge.

Incremental credit growth is defined as credit growth for the financial year compared to the end of the March of the last fiscal year. Here, the rating agency compares credit growth till August 26, 2022 to March 31, 2022.

Further, the gross bank credit rose 15.5% year-on-year to Rs 124.6 lakh crore as of August 2022 with bulk of the credit going to non-food segment. Out of the three main sectors, Agriculture & Allied Activities rose 13.4% YoY to Rs 15.4 lakh crore, Industry sector increased 11.4% YoY to Rs 31.9 lakh crore and Services sector grew 17.2% YoY to Rs 31.6 lakh crore. Personal/Retail loans segment rose by 19.5% to Rs 36.5 lakh crore.


The outstanding industry credit stood at Rs.31.9 lakh crore as of August 26, 2022, compared to Rs.31.6 lakh crore as of March 25, 2022. The credit outstanding of the industry segment registered a growth of 11.4% y-o-y in August 2022 from 1.5% in the year-ago period. The growth was due to robust growth in the MSMEs, inflation-induced working capital requirements, and ease of doing business supported by increasing digitisation in the banking system for faster loan turnarounds, according to rating agency CareEdge

Services Sector

In Services sector, NBFCs with a share of 36.2% grew by 27.8% y-o-y in August 2022 to Rs 11.4 lakh crore as they stepped up on business growth and also shifted to bank borrowings due to elevated capital market yields, CareEdge said in the report.

The report further said that the trade segment (23.1% share) grew 16.9% to Rs 7.3 lakh crore in August 2022, while Commercial Real Estate (share of 9.3%) grew at 4.8% to Rs 3 lakh crore in August 2022 as compared to a drop of 1.0% over a year ago period.

Lending To Priority Sector

Total lending of the priority sector rose by 17.2% to Rs.53.7 lakh crore in August 2022, driven by credit growth in the MSMEs & weaker sections. Credit for agriculture and allied activities rose by 12.5% in August 2022. MSMEs accounts for the largest share of 33.8% within priority segment, followed by agriculture (28.7%) and the weaker sections (23.6%).

Credit Growth Outlook

CareEdge said that the credit growth is likely to remain elevated in the short term due to the onset of the festival season. The rating agency noted that the medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions.

However, inflation remains a key risk, though, the RBI has managed domestic inflation to some extent. Meanwhile, Global inflation has remained high despite hawkish policies. This may lead to demand issues globally causing second-order effects in India.

Credit growth is expected to be in the range of 12-13% for FY23 as previously estimated by CareEdge, however, rate hikes could impact credit growth.