Non-food credit growth eased to 8.09% year on year (YoY) during the fortnight ended January 14 from an over two-year high of 9.28% in the previous fortnight, according to data released by the Reserve Bank of India (RBI).

Outstanding non-food credit as on January 14 dropped to Rs 114.1 lakh crore from Rs 115.95 lakh crore at the end of the previous fortnight, suggesting the surge in loan growth at the end of 2021 may not sustain. Deposits also grew slower at 9.28% YoY to Rs 159.83 lakh crore.

Most banks reported strong numbers for the October-December quarter, with business recovery being supported by both the wholesale and retail segments. While credit growth had been muted through much of 2021, in recent months, banks have been sounding a more optimistic note on the growth recovery, led especially by corporate credit.

Srinivasan Vaidyanathan, chief financial officer, HDFC Bank, said in a post-results call the lender’s asset volumes are gaining momentum to reach new highs. “In the wholesale segment, corporates continue to generate strong cash flows across sectors presenting a fair degree of prepayments. Trade continued to be an opportunity for credit growth. Factoring, invoice financing, export financing, import financing are some of the products we participated in to grow,” he said. HDFC Bank’s corporate banking and other wholesale loans grew by 7.5% YoY and retail assets grew 13.3% YoY.

In a recent report, analysts at S&P Global said Indian banks are set to expand lending and improve their net interest margins in 2022 as they benefit from the nation’s economic recovery. “Indian banks are ready to shift into a growth phase, just in time to meet rising demand as the country’s economy recovers,” said Nikita Anand, associate director for credit risk at S&P Global Ratings, adding, “Faster loan growth will be bolstered by improving asset quality and a normalisation in credit costs over the next 12-18 months.”