The economic slowdown continued to curtail the growth of bank credit in the second quarter as well.
Banks’ credit to the large companies has come down by Rs 76,500 crore during March-July period of this fiscal, with the manufacturing sector bearing the brunt of the slowdown seeing a Rs 11,800 crore deceleration in bank loans, according to the sectoral bank credit data released by the Reserve Bank of India (RBI).
The commercial real estate advances have however bucked the trend by growing by Rs 49,000 crore during this period. Banks continue to tap into the retail consumer demand loans with personal loans, which have grown by Rs 55,800 crore during the March to July period. Of this, Rs 34,800 crore comes from mortgage loans and credit cards.
Bank credit, especially for the well-rated companies has moved from the banking sector to the commercial paper market as the difference between the one-year base rate to which most term loans are linked is most 2% to 3% depending on the tenure.
A senior banker from a public sector bank said, “We selectively lend to commercial real estate sector based on the rating for each project. We have slowed down credit to the telecom, aviation sectors. The large corporates which are highly rated have also moved to the debt market leaving aside the bank credit for lower rates.”
Total bank credit during this period decelerated Rs 18,800 crore to Rs 66.32 lakh crore during this period. Though the banks did not want to take a risk by handing out loans to large companies due to the high stress. Bank credit to the mid-corporate companies went up by Rs 5,900 crore and the micro and small industries by Rs 11,800 crore.
All the segments of retail credit grew, with credit card growing the strongest at 5,200 crore after home loans, followed by vehicle loans at Rs 4,600 crore, consumer durable loans growing by Rs 1,000 crore and education loans growing by Rs 900 crore.
Rajiv Anand, group executive & head – retail banking, Axis Bank, said, “Retail segments like home loans, car and credit cards are growing well for the bank. There is no demand for loans against fixed deposits but then it is not a big business for us.”
Banks have, however, slowed down loans against fixed deposits with this segment of loans decelerating by Rs 5,200 crore and advances against shares slowing by Rs 600 crore.
A senior IDBI official said, “The advances against fixed deposits are something banks love to give because it is secured credit but it may have slowed as individuals are waiting for bank loan rates to dip before borrowing. The bank credit data should improve from October with the good monsoon and also with the broad political agreement on the GST.”