Bank credit growth still lingers in H1 as debt market soars

Annual growth of just 8.4% at Rs Rs 62.02 lakh cr, down 20 bps, even as debt issuances rise 18.6%

Bank credit growth continued to disappoint during first half of the current fiscal with an annual growth of just 8.4 per cent at Rs Rs 62.02 lakh crore, down 20 bps, as per Care Ratings.

Debt market growth was, however, robust with debt issuances increasing 18.6 per cent.

Reflecting the lingering pain of the manufacturing sector, which accounts for 42 per cent of bank credit, the demand remained negative yet again. Services come second at 23 per cent of the total and agriculture at third with a share of 13 per cent and personal loans 20 per cent.

The decline in the services sector demand is mainly due to a steeper decline in loan demand from NBFCs which have been raised 16 per cent more funds from the debt market. This suggests a shift in sourcing funds for NBFCs from banks to the debt market where interest rates have moved downwards at a faster rate.
 
For the first half, credit demand would have been much lower had it not been for the agriculture loans and personal loans segments.

Out of the total Rs 62.02 lakf crore loan of the system in H1, food credit stood at Rs 1.03 lakh crore, up 3.6 per cent, while in the year-ago period demand grew by 15.6 per cent, while non-food credit 1.6 per cent to Rs 60.99 lakh crore, against 1.5 per cent pick-up in the year ago period.

Out of the total non-food credit, agriculture & allied activities cornered Rs 8.13 lakh crore, up 6.2 per cent, down from 8.2 per cent a year ago, and the industrial credit declined 1.1 per cent to Rs 26.29 lakh crore, while the same down -0.4 per cent a year ago, the agency said quoting bank's and RBI figures.

What is worse is that even the services sector demand at Rs 14.01 lakh crore declined by 0.8 per cent, which was an improvement from -1.1 per cent decline last year.

The sectors that saw y-o-y growth are personal loans at Rs 12.55 lakh crore up 7.6 per cent from 5.3 per cent; consumer durables at Rs 0.16 trillion up 5 per cent, but down from 11.1 per cent and home loans at Rs 6.83 lakh crore, up 8.6 per cent against 7.5 per cent.

Credit cards at Rs 34,000 crore, were up 10.7 per cent but down from 11.1 per cent, education loans at Rs 67,000 crore up 6.1 per cent vs 4.3 per cent auto loans at Rs 1.33 lakh crore, a growth of 6.8 per cent but down from 7.6 per cent, the agency said citing RBI data.