Bankers' lending sentiments improve

Mumbai: Bankers' sentiments on lending conditions have improved after the adverse situation witnessed during April-June 2020 quarter due to the Covid-19 pandemic, says an RBI survey report. The survey provides early indications regarding likely movements in credit by scheduled commercial banks.

A broad corroboration is observed in the borrowers' perceptions from the Industrial Outlook Survey (IOS) and lenders' sentiments reflected in bankers' lending sentiment (BLS) for the manufacturing sector, the report says.

The Covid-19 pandemic and related lockdown resulted in significant contraction in loan demand across all sectors during April-June 2020, which severely dampened sentiments among Indian banks. During July-September 2020, however, the loan officers' sentiments recovered quickly, and the improvement was broad based. Infrastructure, mining and quarrying sectors recorded lower optimism than other sectors. Retail/personal loan demand was assessed to have posted maximum recovery after recording sharpest fall during the lockdown quarter (Q1:2020-21), it says.

The subsequent two survey rounds indicated improved quarter-on-quarter loan demand expectations. Among major sectors, bankers have been generally expecting higher demand for retail/personal loans and agriculture segments in the recent times, followed by manufacturing and services sectors.

Bankers do not foresee sudden quarter-on-quarter change in loan terms and conditions; these are more dependent on performance of loans across sectors, macroeconomic conditions and opportunities for growth across sectors.

Bankers' assessment on 'loan demand from manufacturing sector' from the BLS and manufacturers' sentiments on availability of finance (from banks and other sources) from the IOS indicate similar directional changes at a few time points but the perceptions/turning points do not match in other cases possibly because similar assessment from non-bank sources, which may be accounting for a substantial portion of finance, is not available.

The survey results reveal that there has been broad-based improvement in bankers' sentiments on lending conditions, after severe impact of the pandemic during April-June 2020. Responses suggest that perceptions on retail/personal loans, which were most severely hit during the period, have bounced back.