Credit growth outpaced deposit growth in June, according to data released by the Reserve Bank of India (RBI) last week. The central bank points out that year-on-year credit growth for commercial banks accelerated 14.2 percent in June from 6 percent a year ago and 10.8 percent a quarter ago. This data is encouraging, particularly with a latest set of data showing that credit growth grew 15.32 percent in the fortnight ending August 12.

Interestingly, the June data shows that credit growth has been broad-based. All regions of the country (i.e., central, eastern, north-eastern, northern, southern and western), all population groups (i.e., rural, semi-urban, urban and metropolitan), and all bank groups (i.e., public/private sector banks, foreign banks, regional rural banks, small finance banks) recorded double-digit annual credit growth in June.

Meanwhile, a recent survey shows that small and medium enterprises are not concerned about availability of credit, despite monetary tightening by the RBI to control inflation. The Assocham-Dun & Bradstreet survey finds a whopping 79 percent of the respondents anticipating normal access to credit in the third quarter. Also, nearly 80 percent of them are optimistic that their domestic order book will increase in Q3. This is encouraging.

A similar view is reflected in another report published by S&P Global Ratings recently. The report points out that despite high inflation and rising interest rates, Indian companies and banks are better cushioned to withstand the pressure. It adds that while SMEs and low-income households are vulnerable to high interest rates, these risks are limited in their base case of moderate interest rate hikes.

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