Bank lending to large companies rose 6.4% in January

Bank lending to large companies has increased by 6.4% in January 2025. This rise comes after a long decline following the Covid-19 pandemic. Most of the loans are being used for working capital due to higher raw material costs. There is still limited growth in private sector investments in new capital assets, which could slow down credit growth. In comparison, overall bank credit rose by 11% in January this year. This is a decrease from the 20% growth seen at the same time last year. The slowdown in unsecured loans, particularly after new regulations were put in place in November 2023, has led banks to focus more on wholesale lending rather than retail credit. The demand for working capital loans has increased because of rising raw material prices. Many companies are using funds they had saved during the pandemic to meet their current operational needs. As a result, they are now looking for more external funding. Banks are yet to see a notable increase in private sector capacity expansion. There are signs of a potential revival, but concerns remain. The chairman of State Bank of India, SC Setty, noted his worries about the lack of growth in private capital spending. Similarly, KVS Manian, the CEO of Federal Bank, remarked that the private investment cycle is still uncertain. Both executives agree that future corporate credit growth depends on the return of significant private sector investment.