Near-20% industrial credit growth signals early private capex revival: Das

New Delhi: Bank credit growth to industry of nearly 20 percent in July could signal an early revival in private corporate investment, Shaktikanta Das, Principal Secretary to the Prime Minister, said on Tuesday, calling on lenders to support infrastructure and strategic manufacturing.

Speaking at the Business Standard BFSI Insights Summit, the former RBI Governor said stronger industrial borrowing reflected the repair of corporate balance sheets after the Covid-19 pandemic.

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"This credit growth also provides an early indication of a revival in the private-corporate investment cycle, which is crucial for sustaining higher economic growth," he said.

Early signal, not confirmation

A sustained recovery in private capital expenditure would help broaden investment beyond government-led spending. Corporate investment in new plants and capacity expansion has remained uneven despite indications of higher capacity utilisation.

However, credit growth alone does not establish how much borrowing is financing new productive assets rather than working capital or other business requirements. The durability of the recovery will depend on borrowing translating into investment on the ground.

Finance strategic sectors

Das urged the banking, financial services and insurance sector to take a leading role in funding large infrastructure projects and new-age manufacturing.

"It must pivot from simple corporate lending to long-term capital formation. This would involve absorbing a significant portion of the financing needs of the national infrastructure pipeline through structured consortiums and corporate bond expansion," he said.

Banks should align financing with strategic priorities, including semiconductors, advanced electronics and defence production, he added.

Das suggested that smaller banks and financiers focus on individuals and small businesses in smaller cities, where their proximity to borrowers could help them serve local needs. Larger institutions, meanwhile, should concentrate on major infrastructure and manufacturing projects.

India also needs financial institutions with the scale, resilience and international presence to compete with leading global banks as it pursues its developed-economy ambitions for 2047, he said.

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Watch household borrowing

Alongside the push for investment financing, Das called for closer monitoring of consumption-related household borrowing amid concerns over rising debt levels.

He also urged greater use of municipal bonds to finance urban development. With urbanisation increasing funding requirements, civic bodies cannot rely solely on their own revenues and government transfers, he said.

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