Bank credit to industry grew at its fastest pace in eight years in April 2022, showed sectoral data released by the Reserve Bank of India (RBI).reserve Bank of India) on Tuesday. The value of loans deployed in the industrial sector – including large, medium, small and micro industries – grew 8.1% year-on-year (YoY) to ₹31.52 trillion as on April 22.

Credit to medium enterprises grew at the fastest rate of 53.5% year-on-year, while credit to micro and small enterprises grew by 29%. Growth in the large enterprise segment lagged behind at 1.6%. Over the past two years, banks have increased their exposure to medium and small enterprises by implementing the government’s Emergency Credit Line Guarantee Scheme (ECLGS) aimed at supporting small businesses through the pandemic.

Of late, banks have taken an aggressive approach in the MSME segment, hoping to capitalize on the recovery seen across sectors. Earlier this month, state Bank of India ,State Bank Of India) Chairman Dinesh Khara told investors that the bank expects to see strong growth in the SME segment in the coming quarters. “We have structurally strengthened our delivery process in SMEs in the last one year, which should help,” Khara said. The lender is still upgrading its processes. “So, that should help us see better numbers in SMEs.”

ICICI Bankhas also increased its focus on the small business segment. In April, the private lender launched a digital platform aimed at offering comprehensive business solutions to its SME customers, similar to what it offers for corporates.

ICICI Bank’s Chief Financial Officer Rakesh Jha told analysts after the bank’s Q4FY22 results that the bank is focusing on all aspects of the business of its SME customers. “So it is not just about loans, but also about float income on the current account side, FX and trading and all the other income that we get from clients,” Jha said. He added that the bank’s strong growth in this segment is a result of investments made in technology to serve the customers in this segment.

The corporate segment is also improving for most banks, with commodity price inflation and improving consumption driving demand for loans. SBI’s corporate book grew 6.35% year-on-year during the quarter ended March and the bank attributed this to good demand in the infrastructure segment.
However, the bulk of bulk lending in the banking sector is tied to working capital and demand led by capital expenditure is still not strong.