Monday, August 6, 2012

>What is Driving Credit Growth?

What’s new: The Reserve Bank of India has released the June-12 update on sectoral /industry-wise data on credit growth. Non-food credit growth picked up to 18.6% YoY (vs. 16.5% as of May-12; and 19.6% as of June-11).

The key trends were:
a) Industry segment growth moved higher to 20.3% YoY (vs. 18.8% as of May-12 and 22% as of June-11): Large corporate segment picked up to 23.8% YoY from 21.8% YoY in May-12 (and 22.7% in June-11). SME loan growth increased to 12.3% (vs. 11.3% YoY as of May-12 and 11.8% in June-11). Mid-corporate credit growth decelerated to 7.2% from 8.1% in May-12 (compared to 31.7% in June-11).

Infra (ex-telecom) loan growth moved lower to 15.3% YoY (vs. 16.2% in May-12 and 33% in June-11): Power sector growth moved lower to 11.5% YoY (vs. 13.7% as of May-12 and 39.8% in June-11). Lending to roads saw a pick-up in growth to 16.9% YoY, compared with 14.7% in May-12. ‘Other’ infra loan growth, was stable at 29.2%. Telecom segment picked up 3.4% YoY (vs. -0.1% YoY as of May-12).

Non-infra industry growth moved higher to 23.9% YoY vs. 21.5% as of May-12 and 18.3% as of June-11. The sectors that saw a acceleration were petroleum (25.1%% vs.-5.2%),chemicals and chemical products (+20.6% vs 18.9%), rubber and plastic products(+29.1% vs. 25.4%) and ‘other’ industries (44.3% vs. 41.9%). The sectors that saw a deceleration were construction (15.7% vs 17.2%) food processing (19.8% vs 21.2%) and beverage and tobacco (+24.5% vs 29.6%).

b) Personal loan growth moved higher to 15% (vs. 13.1% YoY in May-12 and 17.3% in June-11). Mortgage (+15.2% YoY vs. 14% in May-12), Credit cards (+18.4% vs +12.8% YoY) and ‘other’ personal loans (+22.8% vs. 14.5% in May-12) growth saw an acceleration in growth sequentially. Advances against Fixed Deposits declined to -0.1% vs +4.2% YoY.
c) Micro-credit loan growth continued to shrink at -19.1% YoY (vs. -9.6% as of May-12). This compares with 20.5% YoY as of June-11. On a sequential basis, bank lending to this sector was down 3.7% MoM.

d) Services sector loan growth picked up to 19.1% YoY vs. 15.7% as of May-12 ( 20.9% in June- 11): Lending to NBFCs (50%YoY vs. 41% YoY) and transport operators (34.9%YoY vs. 22.2% YoY) picked up. Bank lending to shipping declined 22.5% YoY, compared with a decline of 17.9% YoY in May-12.

e) CRE segment loan book increased to 4% YoY from 2.8% in May-12: Outstanding bank loans to the sector amounted to US$23.6 bn, or 2.7% of non-food credit.

To read report in detail: CREDIT GROWTH