The economic shock of the COVID pandemic has been well resisted by the commercial banking system: economic survey
“The economic shock of the pandemic has been weathered well so far by the commercial banking system, although some lagged impact is still ongoing,” says the Economic Survey 2021-22. The study, tabled in Parliament by Finance and Union Affairs Minister Nirmala Sitaraman, also notes that bank credit growth stands at 9.2% as of December 31, 2021.
Personal loan growth improved to double digits
The Survey points out that personal loan growth improved to 11.6% from 9.2% the previous year. Home loans, the main component of personal loans, recorded an increase of 8% in November 2021. Growth in auto loans, the second largest component, improved to 7.7% in November 2021 from 6, 9% in November 2020.
The study indicates that agricultural credit continued to register robust growth and was 10.4% (year-on-year) in 2021, compared to 7% in 2020. Micro and small industry credit growth accelerated to 12.7% in 2021 from 0.6% a year ago, reflecting the effectiveness of various measures taken by the Union Government and the Reserve Bank of India (RBI) to boost the flow of credit to the micro, small and medium-sized enterprises (MSME) sector.
According to the survey, significant excess systemic liquidity, forward guidance to maintain the dovish stance, and the external benchmark for loan pricing in some sectors contributed to monetary transmission.
Scheduled Commercial Banks (SCBS)
The Study observes that gross non-performing advances (GNPA) of SCBs decreased to 6.9% in 2021, net non-performing advances (NNPA) amounted to 2.2% and the ratio of restructured standard advances (RSA ) of SCBs increased. to 1.5% from 0.4%.
Overall, the SCB stressed advance rate rose to 8.5% at the end of September 2021.
The Study asserts that the COVID-19-related asset quality waivers and moratoriums have contributed to an increase in restructured assets and, therefore, an accentuated advances ratio.
Public Sector Banks (PSB)
The Study highlights that PSBS GNPA decreased to 8.6% at end-September 2021. PSBS stressed advances ratio increased to 10.1% over the same period due to higher restructured advances.
Based on the capital position as of September 30, 2021, all public and private sector banks maintained the capital conservation buffer (CCB) well above 2.5%, according to the survey.
Factoring in India
The survey indicates that factoring is an important source of liquidity globally, especially for MSMEs. Therefore, the Factoring Regulation (Amendment) Act 2021 has been enacted with the amendments as per the recommendations of the UK Sinha Committee. The RBI notified the significant regulations relating to the Amendment Act in January 2022.
The amendments relaxed the restrictive provisions of the law and, at the same time, ensured the establishment of a strong regulatory or supervisory mechanism under the RBI. Overall, this change would lead to the broadening of the factoring ecosystem in the country and significantly help MSMEs by providing additional opportunities to avail credit facilities, according to the survey.
Deposit insurance in India
The survey claims that the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, passed by Parliament in 2021, brought significant changes to the Indian deposit insurance landscape.
The study also notes that, by banking group, the percentage of insured deposits to total deposits is 84% for Regional Rural Banks (RRBs), 70% for Cooperative Banks, 59% for State Bank of India (SBI), 55% for public sector banks (PSB), 40% for private sector banks and 9% for foreign banks.
Till March 31, 2021, a cumulative amount of Rs 5,763 crore has been paid for claims since the inception of deposit insurance, Rs 296 crore for 27 commercial banks and Rs 5,467 crore for 365 cooperative banks , according to the survey.
According to the survey, the Unified Payment Interface (UPI) is currently the country’s largest retail payment system by transaction volume, indicating its wide acceptance. In December 2021, 4.6 billion transactions worth Rs8.26 lakh crore were carried out by UPI.
RBI and the Monetary Authority of Singapore announced a project to link UPI and PayNow, which is expected to be operational by July 2022. Bhutan recently became the first country to adopt UPI standards for its QR code. It is also the second country after Singapore to accept BHIM-UPI from merchants.
The survey indicates that the total credit of the non-banking financial corporations (NBFC) sector increased slightly to Rs 28.03 lakh crore in September 2021 from Rs 27.53 lakh crore in March 2021.
NBFC credit intensity, measured by NBFC credit as a ratio of GDP, has steadily increased and stood at 13.7% at the end of March 2021. The industry remained the largest recipient of credit extended by the NBFC sector, followed by personal loans and services, he added.
The survey observes that between April and November 2021, initial public offerings (IPOs) of 75 companies were listed raising Rs 89,066 crore compared to 29 companies raising Rs 14,733 crore during the same period in 2020, indicating a dramatic increase of 504.5. % in raising funds.
The money raised from IPOs exceeded what has been raised in the past decade by a wide margin, according to the survey.
The amount raised under the preferential allocation increased by 67.3% during the period April-November 2021 compared to the same period of the previous year. Overall, from April to November 2021, Rs1.81 lakh crore was raised through equity issuances through various modes i.e. public offerings, rights, qualified institutional placements ( QIP) and preferential issues.
Mutual fund activities
The survey highlights that the net assets under management (AUM) of the mutual fund industry increased by 24.4% to Rs 37.3 lakh crore at the end of November 2021, from Rs 30.0 lakh crore at the end of November 2020.
Net resource mobilization by mutual funds was Rs2.54 lakh crore from April to November 2021, compared to Rs2.73 lakh crore during the same period in 2020.
The survey appreciates that the total number of subscribers to New Pension Scheme (NPS) and Atal Pension Yojana (APY) increased to 463 lakh in September 2021 from 374.32 lakh in September 2020, registering a growth of 23, 7% over the year.
The overall contribution under the NPS increased by more than 29% between September 2020 and September 2021. The maximum contribution growth was recorded under all citizen models (51.29%), followed by the business sector (42 .13%), the APY (38.78%), the general government sector. (28.9%) and the central government sector (22.04%).
The AUM of NPS and APY stood at Rs6.67 lakh crore at the end of September 2021 and recorded an aggregate growth (YoY) of 34.8%. The survey indicates that the gender gap in APY signups has narrowed with an increased participation of female subscribers, from 37% in March 2016 to 44% in September 2021.