Covid-19 crisis: Banking credit shrinks 1.7% in May as lockdown bites

According to Reserve Bank of India (RBI) data, gross bank credit was down to Rs 91.08 trillion in May, from Rs 92.63 trillion in March.

Bank credit covering all segments — agriculture, industry, services, retail, and priority — shrunk by 1.7 per cent in May, compared to March. May was the second full month of the nationwide lockdown.

According to Reserve Bank of India (RBI) data, gross bank credit was down to Rs 91.08 trillion in May, from Rs 92.63 trillion in March.

On a year-on-year (YoY) basis, gross bank credit growth decelerated to 7 per cent in May 2020, from 11.5 per cent in May 2019, the RBI said in a statement.

Loans to industry — large, medium, small and micro — declined by 1.5 per cent in the two months to Rs 28.61 trillion in May. The micro and small segment showed a 7.6 per cent slump, medium size a decline of 5.4 per cent, and large segment a fall of 0.4 per cent.

The retail segment, covering categories like housing, credit cards, and vehicle loans, contracted 2.9 per cent (Rs 74,790 crore) in the two months. The outstanding retail credit stood at Rs 24.78 trillion. Credit card outstanding — a key segment of the retail category — declined by 14.1 per cent to Rs 96,978 crore in May, compared to Rs 1.08 trillion in March.

The housing loan portfolio also shrunk by 0.7 per cent to Rs 13.29 trillion in May, from Rs 13.38 trillion in March.

Bankers said the June quarter is usually lean, and this year the lockdown has only added to demand (for credit) woes. There has been some traction in credit following resumption in economic activity in some belts, albeit on a lower scale. Demand for working capital from the emergency credit line, however, has improved in June.

Coronavirus impact: Credit growth likely to remain modest, says RBI

MPC report says better transmission of rates would remain priority.

With the Covid-19 pandemic posing huge risks for the Indian economy, the credit growth is likely to remain modest, reflecting weak demand and risk aversion, said the Reserve Bank of India (RBI) in its monetary policy (MPC) report.

“Better transmission of monetary policy impulses to the credit market would remain a priority,” the RBI said.

Credit offtake in the economy has been fairly slow with non-food credit growing at 6.1 per cent in FY20 (up to March 13), compared to 14.4 per cent growth in the same period last fiscal year.

According to RBI, the slowdown in credit growth was spread across all banks, especially those in the private sector. However, in the recent period (December 2019-March 2020), the public sector banks (PSBs) have seen a slight uptick in credit offtake.

The data shows that of the incremental credit extended by scheduled commercial banks (SCBs) during the year (March 15, 2019 to March 13, 2020), 62.6 per cent was provided by private sector banks, 36.6 per cent by PSBs, and 0.8 per cent by foreign banks.

The report says banks’ investment in commercial papers (CPs), bonds, debentures, and shares of public and private corporates, which is a part of non-SLR (statutory liquidity ratio) investment, has gone down in the second half of FY20 (up to March 13) than a year ago because of lower investments, resulting non-food credit growth being lower.

“With credit offtake remaining muted and non-SLR investments declining, banks increased their SLR portfolios. Banks held excess SLR of 8.4 per cent of net demand and time liabilities (NDTL) on February 28, as compared with 6.3 per cent of NDTL at the end of March 2019,” RBI said.

Bank credit grows 7.1% and deposits increase 10%, reveals RBI data

Bankers said that with private investment practically coming to a halt, there was little demand for corporate credit.

The pace of year on year growth in commercial bank credit more than halved to 7.1 per cent at end fortnight (December 20, 2019) from 15.11 per cent a year ago, data released by the Reserve Bank of India revealed.

Between December 6 and December 20, lenders disbursed Rs 12,519 crore, taking outstanding of scheduled commercial Rs 99.47 trillion, according to Reserve Bank of India data. On the other hand, the deposits in the same period increased 9.09 per cent to Rs 130.08 trillion by the end of December 20. However, in the fortnight between December 6 and December 20, the deposits decline 0.7 per cent.

Bankers said that with private investment practically coming to a halt, there was little demand for corporate credit. While activity may show an uptick in the second half, it will hardly compensate for the extended slowdown seen since the beginning of the year.

Companies are battling stress and are deleveraging wherever possible. The retail segment is showing steady growth, but it is not in a position to make up for the slump in the industry segment.

Rating agency ICRA in a report last week had said, with the Indian economy caught in a slowdown, bank credit is expected to expand at a muted 6.5-7 per cent in 2019-20 (FY20) from 13.3 per cent in FY19.

This will be the lowest in 58 years, mainly on account of lower working capital requirements by companies and risk aversion among lenders. According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to

Rs 6.5-7 trillion, there will still be a 40-45 per cent year-on-year (YoY) decline.

Business Standard

Slowdown blues: Bank credit growth may fall to 6.5-7% in FY20, says Icra

According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to Rs 6.5-7 trillion, there will still be a 40-45% year-on-year (YoY) decline.

Market News : With the Indian economy caught in a slowdown, bank credit is expected to expand at a muted 6.5-7 per cent in 2019-20 (FY20) from 13.3 per cent in FY19, rating agency ICRA said in a report. This will be the lowest in 58 years, mainly on account of lower working capital requirements by companies and risk aversion among lenders.

According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to Rs 6.5-7 trillion, there will still be a 40-45 per cent year-on-year (YoY) decline.

As of December 6, 2019, incremental bank credit increased by Rs 80,000 crore, whereas banks disbursed Rs 5.4 trillion during the same period in FY 19 and Rs 1.7 trillion in FY18 (till December 2017).

Bankers said that with private investment practically coming to a halt, there was little demand for corporate credit. While activity may show an uptick in the second half, it will hardly compensate for the extended slowdown seen since the beginning of the year. Companies are battling stress and are deleveraging wherever possible. The retail segment is showing steady growth, but it is not in a position to make up for the slump in the industry segment.

According to ICRA’s assessment of 37 scheduled commercial banks, the YoY credit growth was 7.9 per cent as of September 2019. While credit growth in public sector banks was merely 4.4 per cent, private banks registered 15 per cent growth in the same period.

Dinesh Khara, managing director, State Bank of India, said, “The private sector investment and consumption has been impacted in the context of slow economic growth. This led to deceleration in credit growth in the current financial year. However, things are expected to change for better in the second quarter (July-September 2020) of the next financial year (FY21).”