Banks’ credit to the microfinance, telecom, jute and tea sectors shrank in April-December 2011, as lenders turned cautious with economic slowdown and regulatory challenges.
Microcredit dues fell to Rs 21,000 crore in December from Rs 26,900 crore in March 2011, according to Reserve Bank of India data. In April-December 2010, micro-credit had grown 32.2 per cent.
Banks have been reluctant to lend to the segment after the latter came under a regulatory and legal cloud. Their profitability had been under strain, said a senior official with a large public sector bank.
Loans to the telecom segment were also down 9.4 per cent, against a credit growth of 59.3 per cent in the same period of 2010.
This was because of the impact of the 3G/BWA auction-related loans given in June-September last year. Loans to the telecom sector declined to Rs 90,900 crore from Rs 1,00,400 crore at the end of March 2011.
In contrast, their lending to companies in petroleum and coal grew 15.5 per cent in April-December 2011 against a fall of 18.3 per cent in the nine months of 2010-11.
Indian oil marketing companies stepped up borrowing to manage the pressure from under-recoveries, a rise in commodity prices and rupee depreciation. In contrast, RBI data shows credit to the petroleum and coal sectors had shrunk 18.3 per cent in the nine months ending December 2010.
A senior State Bank of India official said rupee depreciation had led to an increase in working capital requirements of oil marketing companies. The heavy borrowing by the three oil marketing companies — Hindustan Petroleum, Bharat Petroleum, Indian Oil Corporation — is reflected well in their increase in interest costs in the first six months of the current financial year. Indian Oil’s debt increased by Rs 20,000 crore, while its interest costs were up 58 per cent in these six months.
Overall credit growth for the industry segment fell to 14.7 per cent in the first nine months of 2011-12, led by single-digit rises in textiles, food processing and construction, according to RBI data. At the same time a year before, credit growth was a healthy 18.3 per cent.
Revati Kasture, head-research, CARE Rating, said the economic slowdown had hit capital and operational expenditure, leading to reduced demand for funds. Banks were also battling a rise in bad loans and are cautious on extending credit, especially to small and medium enterprises.
The slump in growth rates for micro & small industry (7.7 per cent) and medium size industry (7.6 per cent) has been significantly higher compared to the 12-19 per cent growth in 2010-11. Large industry has not been hurt by the current slump, but witnessed some moderation in credit growth, at 17.1 per cent.
Infrastructure loan growth was 13.3 per cent (30.5 per cent a year before). Power sector growth decelerated to 17.2 per cent from 35.4 per cent and lending to the roads sector picked up, to 17.8 per cent growth from one of 15.6 per cent.
