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Sector-wise credit: services and agri continue to drive growth
The RBI in its latest print for April 2024 reported overall loan growth of 15.3% YoY, excluding merger, supported by services at 22.8% YoY and agriculture at 22.5% YoY, even as industry at sub-8.0% YoY growth remains soft. Retail growth improved to >20% levels in April from 17-18% levels in Q4; however, moderation in growth continues in the unsecured segment, partly attributed to RBI regulations. With this, retail currently forms ~31% of loans, up from 19% in FY15, while the industry has dropped to ~23% from 44% in FY15. On a MoM basis, we note two trends: 1) traction has softened across retail unsecured credit; however, housing and vehicular portfolios saw a MoM uptick, and 2) growth in large industry continues to see soft growth even as the MSME segment cushioned the impact. FY24 loan growth at >16% YoY was better than our estimates; we believe FY25 will be relatively soft on growth and a reasonable outcome will be contingent on the industry (private capex pickup of which green shoots remain elusive).
Secured loans drive retail growth while unsecured growth softens
Retail growth came in at 20%-plus in April versus ~17.7% YoY in the previous month based on the base effect. On a MoM basis, growth softened to sub-0.5% vs 3%-plus run-rate prior to RBI regulations. Interestingly, unsecured retail growth in consumer durables, personal loans and credit cards continues to soften. With this, unsecured retail forms 31% on retail credit and ~10% of overall. Meanwhile, housing reported robust growth of 21% YoY, constituting 51%+ of retail loans and 16.7% of overall. Among Other segments, gold and education loans see moderation while vehicle loans post steady growth.
Services growth sustains momentum
Services witnessed growth of 22.8% YoY excluding merger numbers whereas mixed trends were seen MoM, with growth softening to 0.1%, led by moderated growth in commercial real estate, down 0.4%, retail & wholesale trade by 0.1% each and a sharp decline in Other services by 1.1%. Interestingly, within NFBC, growth of Other public finance institutions, namely gold loan and power finance NBFC, has risen compared to housing finance companies (HFC). Among Other segments, aviation was up 4.1% MoM, and professional services sustained growth while tourism & computer software lessened.
Growth still soft in large industries; MSME cushions the impact
Industry growth remains soft at sub-8% YoY and contraction of 0.7% MoM, led by a large industry decline by 1.4% MoM. The medium segment was up 1.8% MoM and micro at 0.7% MoM. We remain watchful of large industry development and believe the corporate capex cycle will be key to bolster overall growth. Within the industry, growth was supported by food processing and chemicals verticals whereas offtake in the infrastructure segment remains elusive. Ports continues to struggle. We expect large industry credit growth to improve once the private capex cycle picks up, which, we believe, is still some time away. |
