Bank loans to individuals grew at 6-year low in February says RBI

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Updated: April 1, 2017 4:23:23 AM

Bank loans to individuals recorded their weakest growth in six years in February, expanding at just 12% year-on-year (y-o-y) to `15.4 lakh crore, data released by the Reserve Bank of India.

Bank loans, Reserve Bank of India, Bank loan data by RBI, Loans to individuals, industrial credit growth, Bank credit, HFCsBank loans to individuals recorded their weakest growth in six years in February, expanding at just 12% year-on-year (y-o-y) to `15.4 lakh crore, data released by the Reserve Bank of India. (Source: Reuters)

Bank loans to individuals recorded their weakest growth in six years in February, expanding at just 12% year-on-year (y-o-y) to `15.4 lakh crore, data released by the Reserve Bank of India on Friday showed. In February 2016, retail credit had grown at a robust 19.2% over February 2015. Loans to individuals had been clocking growth rates in the mid-to-late teens since May 2015 before signs of a slowdown began to surface in November 2016. In February, the outstanding on credit cards grew the most —28.2% — among all categories of loans to individuals. Vehicle loans and consumer durable loans grew 18.2% and 18.1%, respectively. Housing loans grew 11.4%, as compared to 19% in the year-ago period.

Credit to industry contracted on a y-o-y basis for the fifth straight month in February, falling 5.2% to `26.01 lakh crore. The figure, unchanged from that in the previous month, marks the worst industrial credit growth print in at least six years. In February 2016, the corresponding figure had stood at `27.45 lakh crore, up 5.4% over February 2015. Industrial credit has been falling almost consistently since August, recovering briefly to clock a 0.9% growth figure in September.

Credit deployment in industry fell across categories —12.2% in the medium segment, 5.2% in the micro and small segment, and 4.9% in large industry. Bank credit to industry was muted for the last couple of years as lenders turned cautious amid the worsening asset quality and well-rated corporates chose to raise money from the bond market. Analysts expect bank borrowings by industry to remain muted in near term, though the outlook for retail credit offtake is less gloomy. In a note dated March 30, Nomura wrote, “We believe the current recovery cycle will be less credit-intensive and we expect system growth to remain ~9-10% CAGR over FY17-19F, with corporate loans growing at just 6-7% CAGR and retail book (ex mortgages) growing at +15% CAGR.”

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Some experts, however, believe that the government’s recent push for affordable housing may benefit housing finance companies, which have already begun to take some share of the mortgage market away from banks. “Housing Finance Companies (HFCs) should gain as 39% of home loan disbursal by HFCs are in the `1-`2.5-million loan size segment, which benefits the most from the scheme (the recently revised credit linked subsidy scheme),” investment bank Jefferies wrote in a note dated March 27.

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