Non-food credit growth reached an over two-year high of 9.28% year-on-year (y-o-y) during the fortnight ended December 31, according to data released by the Reserve Bank of India, picking up sharply from the 7.41% growth seen in the previous fortnight.

Outstanding non-food credit as on December 31 stood at Rs 115.95 lakh crore, higher than Rs 112.29 lakh crore at the end of the previous fortnight. Deposits grew 10.28% y-o-y to Rs 162.41 lakh crore.

In a recent note, analysts at State Bank of India’s (SBI) economic research department said credit offtake improved in the December quarter. The incremental credit deposit ratio (CD) ratio beginning Q3FY22 was at 133 as against an incremental CD ratio of only two during H1FY22, they said.

Credit growth was muted through much of 2021, with corporates deleveraging their balance sheets and consumer lending doing most of the heavy lifting for banks. In recent months, banks have sounded a more optimistic note on the recovery in corporate credit, though it is yet unclear what impact a fresh surge in Covid-19 infections could have on growth.

The SBI report said sectors where the demand for credit started picking up during the last three months include non-banking financial companies (NBFCs), telecom, petroleum, chemical, electronics, gems & jewellery, power and roads.

Other analysts, too, have taken a favourable view of the credit market, while cautioning that risks from a fresh surge in Covid-19 infections remain. In a recent report, analysts at rating agency CareEdge said the outlook for bank credit growth is expected to be 8- 9% for FY22 with a low base effect, economic expansion, rise in government and private capex, extended support under the emergency credit line guarantee scheme, and a retail credit push.

“The medium-term prospects look promising with diminished corporate stress and increased provisioning levels across banks. However, the new coronavirus variant (Omicron) could dampen momentum if localised lockdown measures increase,” they said.