Continue to expect bank credit to grow 20% in FY11. Non food credit today climbed to 16.3%, in line with our 16% March 10 forecast, from November’s
10.6%. We look to the previous cyclical upturn of 2003-05 to chart what lies ahead. Retail loans should typically lead the turnaround, as is already happening.
Corporate credit demand should pick up the baton in 2HFY11 with greater growth visibility. Its composition should shift in favor of loans from commercial paper as working capital demand rises.
Continue to expect credit to grow 20% in FY11. Non food credit today climbed to 16.3%, in line with our 16% March 10 forecast, from November’s 10.6%. This upturn does largely reflect reversal of base effects of a temporary routing of the oil subsidy through banks in late 08. That said, loan demand itself is also picking up.
Retail loans are already leading the turnaround in credit demand in a repeat of 2003-05. Anecdotes suggest that the urban consumer is returning to borrow –
especially, for housing.
Expect corporate loan demand to pick up in 2HFY11. Industrial credit had reacted with a lag even in the last upturn. Most banks have already reported an
increase in loan sanctions.
