Mr. Darpin Shah, Institutional Research Analyst, HDFC Securities.
Banks (Sector Update- Credit Trends): Unusual trends
Non-food credit growth (strangely) accelerated slightly on a YoY basis to 7.3% (vs. 6.7% YoY in Mar-20) but dipped 1.2% MoM (Apr usually sees a MoM decline- avg. 2.2% in the last three years). This trend was led by growth in industrial and service credit (particularly NBFCs, CRE, petroleum and petrochem.), which saw accelerating YoY growth and lower MoM declines (typical of Apr). However, personal (esp. credit card) and agri loan growth dipped significantly- unsurprisingly, and indicative of the disruptive impact of COVID-19.
The trends seen in industrial and service credit can be partly explained by higher working capital/ short-term credit limit utilisation as well as the moratorium, we believe. Such growth is likely to be transient. Trends in personal loans are reflective of banks' inability and reluctance to disburse loans during the lockdown as well as weaker demand for credit. This can persist in the near term, even as the lockdown lifts. Consequently, we believe non-food credit is set to trend downwards as the year progresses.
Industrial credit growth accelerated slightly on a YoY basis to 1.7% (vs. 0.7% in Mar-20). The sector usually sees MoM de-growth in Apr (avg. ~2.0% in the last 4 years) and in Apr-20, credit de-grew by ~0.7%. Large industries saw accelerating YoY growth (2.7% YoY vs. 0.6% YoY in Mar-20) and 37bps MoM growth. Micro and small (-2.2% YoY, -6.2% MoM) and medium credit (-6.4% YoY, -5.8% MoM) saw some of the sharpest YoY declines in the last ~2.5 years. The MoM de-growth in micro and small credit was sharpest ever, while that in medium credit was the sharpest in the last 2.5 years.
Service credit growth improved to 11.2% YoY (vs. 7.4% in Mar-20) led by strong growth in NBFCs (~30% vs. 26% in Mar-20) and CRE (+15% vs. 14% in Mar-20). MoM credit de-growth (typical of Apr) was the lowest in the last 4 years at 0.8% (vs. an avg decline of ~5.5% in the last 3 years in Apr). This trend was led by credit to NBFCs (flat MoM vs. sharp dip seen in Apr in the last 3yrs) and CRE (flat MoM vs. avg 1.1% fall seen in Apr in the last 3yrs).
Personal loans, which had been supporting overall non-food credit growth over FY20 saw a perceptible slowdown in growth to 12.1% YoY (vs. 15.0% in Mar-20). Credit to the segment de-grew ~2.5% MoM (sharpest ever MoM dip) with all sub-segments de-growing MoM (credit cards, home loans, PL).
Agri credit grew 3.9% - slowest rate of growth in the last 2 years. |
