Chart of the day: RBI study shows why investment demand still needs a leg up
1 min read.Updated: 14 Mar 2019, 12:05 AM ISTLivemint
What this suggests is that lenders are warming up to big projects, though they remain cautious on others
Finance sanctioned for small projects with cost of less than ₹500 crore has fallen sharply
While it’s well known that investment demand has remained lacklustre in the past few years, it looks like Indian banks have turned friendlier towards large projects.
Sanctioned bank credit grew only in the case of large projects—with a size of more than ₹5,000 crore—in fiscal year 2018 (FY18). The growth in aggregate projects with bank finance fell by 5.6% over the preceding year, shows data from the Reserve Bank of India (RBI).
What this suggests is that lenders are warming up to big projects, though they remain cautious on others. But note that the increase is marginal and stands out only because credit to projects of smaller sizes is falling.
Finance sanctioned for small projects with cost of less than ₹500 crore has fallen sharply. This perhaps indicates that lenders believe projects without scale are more vulnerable, especially in the aftermath of tax reforms.
The growth in big projects is a sign that investment is finally reviving and requires continued fiscal and monetary assistance to gather traction. In its latest monetary policy, RBI noted that investment demand still needs support and that it is willing to provide it.
RBI, in its special article on investment, stated that on the basis of the project pipeline sanctioned in preceding years, the planned capex could rise by 16% in FY19 over the previous year.