The Aryavarth Express
New Delhi, December 1 — India’s bank credit growth, which had slowed in recent quarters, is expected to recover as companies begin tapping more funds for their day-to-day operations, according to a new report by the State Bank of India (SBI).
The report noted that the recent dip in credit demand was largely temporary and linked to the surge in IPO fundraising across various sectors. With those equity market funds now being deployed, corporates are turning back to banks to meet their working capital needs.
“Increased working capital utilization by corporates indicates that credit growth is likely to rebound in the coming quarters,” the report said.
SBI highlighted that while there is no direct one-to-one relationship between IPO mobilisation and bank credit growth, historical trends show a modest negative correlation. Years with higher IPO fundraising often see relatively slower credit expansion, as companies rely on equity capital for expansion, capex or debt repayment, reducing their immediate need to borrow.
Sectoral data reflects this pattern: industries such as finance, automobiles, pharmaceuticals, telecom, consumer durables and infrastructure recorded lower credit growth during periods of heavy IPO mobilisation.
However, SBI now sees a clear turnaround. Firms across multiple sectors have begun increasing their working capital utilisation—an early sign of strengthening credit demand. As business activity remains robust and production levels rise, companies require more financing for inventories, raw materials, supply-chain operations and other operational expenses. With IPO proceeds and internal funds mostly exhausted, banks are once again becoming a key source of financing.
The report added that India’s strong economic momentum, supported by healthy GDP growth, will naturally fuel higher financing needs and reflect in improved loan offtake.
In this context, SBI underscored the crucial role of the Reserve Bank of India in managing liquidity. Ensuring adequate liquidity in the financial system will help banks meet rising credit demand and maintain stable borrowing conditions.
Overall, the report concludes that with increasing working capital requirements, fading IPO-related effects and resilient economic activity, India’s bank credit growth is poised to strengthen in the coming quarters.
