Non-food credit growth slips further to 7.08%

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Updated: January 3, 2020 2:31:29 AM

According to provisional data released by the Reserve Bank of India (RBI), outstanding loans to companies and individuals stood at Rs 98.6 lakh crore during the period, up from Rs 92.1 lakh crore during the comparable fortnight of 2018.

Non-food credit growth, slowdown in consumption, Reserve Bank of India, credit deposit ratio, NBFCDeposits in the banking system rose 10.09% y-o-y to Rs 130.08 lakh crore, but fell 0.74% compared to the previous fortnight.

The non-food credit growth continued its declining trend during the fortnight ended December 20, hitting another two-year-low of 7.08% year-on-year (y-o-y). This marks the slowest rate of growth since October 2017, when it had come in at 6.4%. A slowdown in consumption, limited investment demand from corporates and risk aversion by banks are playing their parts in weighing down the loan growth.

After the short-lived uptick in credit offtake during the festival season in October, the rate of growth in credit resumed a falling trend. The non-food credit growth slipped into single-digit in September, clocking an 8.69% growth during the fortnight ended September 27. Thereafter, it improved marginally in October to reach 8.79% before falling again.

According to provisional data released by the Reserve Bank of India (RBI), outstanding loans to companies and individuals stood at Rs 98.6 lakh crore during the period, up from Rs 92.1 lakh crore during the comparable fortnight of 2018. Between December 6 and 20, the non-food credit rose 0.53%.

Deposits in the banking system rose 10.09% y-o-y to Rs 130.08 lakh crore, but fell 0.74% compared to the previous fortnight. During the comparable fortnight of 2018, deposits with banks had grown 9.22%. The credit deposit (CD) ratio for the fortnight stood at 75.81%, up from 74.85% in the previous fortnight.

State Bank of India chairman Rajnish Kumar said in a recent interview that credit growth will remain an issue in 2020, with the industry seeing loan growth of just 7-8% y-o-y. Analysts, too, do not expect a pick-up in credit offtake anytime soon. Rating agency Icra expects the bank credit growth to decelerate sharply to 6.5-7% y-o-y during
FY20, from 13.3% during FY19, following limited incremental credit growth till date this fiscal.

The incremental bank credit has increased by only Rs 0.8 lakh crore during FY2020 till December 6 to Rs 98.1 lakh crore, in contrast to the rise of Rs 5.4 lakh crore and Rs 1.7 lakh crore during previous corresponding periods of FY19 and FY18, respectively, Icra said in a recent report.

The report explained that the retail segment, which has been driving whatever little growth banks are seeing, may also run out of steam soon. “The recent data on bank credit released by the Reserve Bank of India reveal that the contraction in incremental credit outstanding to the services as well as the industrial segments offset the entire growth in credit to the retail segment during 7M FY2020,” the rating agency said, adding that “a sizeable portion of growth in retail credit is also driven by the purchase of retail loan portfolios of NBFCs and HFCs by banks.”

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