Spiralling inflation is a cause for worry, but credit growth too is spiralling in a positive sign for the economy. While loans to industry reached a record high of ₹31.82 lakh crore in July on rising demand for project finance and working capital, retail loans too surged.

Credit to industry remained stagnant around ₹28-29 lakh crore per month in 2020 and 2021. Industry comprises 27.7% of total non-food credit. As per the RBI‘s July data on sectoral credit, loans to industry expanded 10.5% year on year – the highest in the last eight years.

“Utilisation of existing sanction limits and re-leveraging in a few sectors led to industry credit break out of the range of ₹28-29 lakh crore during the past three years,” said Kunal Shah, analyst at

. “We believe revival in consumer demand (and) rise in private capex, followed by rise in government expenditure, can be potential triggers for industry credit growth, and catalyse overall credit growth revival.”

Bank loans registered 15.1% growth in July compared with 5.1% a year earlier as large corporates came back to banks. Credit to large industry grew by 5.2% in July against a contraction of 3.8% a year earlier, as per RBI data. Medium industries recorded credit growth of 36.8%, down from 59% in July 2021, while credit growth to micro and small industries accelerated to 28.3% from 10.5% during the same period.

“We are certainly having conversations with corporate India on capacity utilisation, especially in the area of specialty chemicals, cement, renewables,” said Rajiv Anand, deputy managing director at

. “Will all of that get financed by the banks? Probably not, because corporate India’s operational cash flows have improved so that they are quite happy to use internal accruals to create fresh capacities as well,” he added.

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