Banks: Sector Credit Trends - Non-food credit growth continues to slow - HDFC Securities

Mr. Darpin Shah, Institutional Research Analyst, HDFC Securities

Overall non-food credit growth slowed further to just 5.8% YoY (a 38-month low). This trend was on expected lines and was led by slowing industrial and personal loan growth, even as growth in service sector and agricultural credit accelerated slightly.

Even as banks see an uptick in disbursals, we expect growth in non-food credit to remain range bound in the near term, as repayments continue to edge upwards.

Industrial credit growth continued to trend downwards with nil growth in September. This trend was led by a reduction in large industrial credit, which de-grew 0.6% YoY (a 39 month low, -1% MoM). Credit to micro and small industries was flattish YoY. Spurred by disbursals under the MSME credit guarantee scheme, credit to medium industries reached a 103-month high at 14.5%, with record-breaking MoM growth (11.9%). Within industrial credit, sectors such as gems and jewellery, glass and glassware and all engineering including electronics saw persistent YoY de-growth. Credit for vehicle, vehicle parts and transport equipment and construction saw accelerating growth. Infrastructure continued to remain muted at 1.1% YoY. Within this segment, credit to the power sector de-grew 0.9% YoY. After rapid growth between February 2019 and June 2020, credit to the telecom segment de-grew by 0.2% YoY.

Service sector credit growth accelerated to 9.1% YoY, after slowing between May and August. Within this segment, growth in credit to NBFCs (+12.5% YoY, lowest in the last 35 quarters), and CRE (+5.5% YoY, lowest in the last 21 quarters) continued to slow. Overall trade credit growth remained healthy at 11.5% YoY. Wholesale trade credit growth continued to accelerate, reaching 21.2% YoY (highest level since March) even as retail trade credit growth slowed to 4.2% YoY.

The personal loan segment has seen the most dramatic decline in growth because of the pandemic. Growth in this segment slowed to the 9.2% YoY, the lowest in the last 120 months. This was led by a slowdown in home loan growth to 8.5% YoY, the lowest in the last 125 months. Growth in credit card debt was uninspiring at just 6.3% YoY, albeit higher than the low of -0.8% seen in May. Vehicle loan growth continued to accelerate gradually, reaching 8.8% YoY.

Agricultural credit growth accelerated slightly to 5.9% YoY.

Source : Equity Bulls

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