Out of demonetisation shadow: Non-food credit grows 14.3%

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Updated: March 1, 2019 7:15:14 AM

The net corporate bonds outstanding, at the end of December 2018, was Rs 29.48 lakh crore, up 11.4% from Rs 26.47 lakh crore in December 2017

Led by 20% y-o-y retail loan growth and 13% loan growth in the SME segment, Axis Bank’s loan growth in Q3FY19 stood at 13% y-o-y.

Non-food credit or loans to individuals and companies grew 14.3% year-on-year (y-o-y) during the fortnight ended February 15, marginally slower than 14.4% y-o-y reported in the previous fortnight. During the comparable fortnight a year ago, non-food credit growth stood slower at 11.6%.

The net corporate bonds outstanding, at the end of December 2018, was Rs 29.48 lakh crore, up 11.4% from Rs 26.47 lakh crore in December 2017, as per the latest data released by Sebi. Data from the Reserve Bank of India (RBI) showed that the net outstanding on commercial papers stood at Rs 4.98 lakh crore as of December 31, 2018, up 21.8% from Rs 4.09 lakh crore in the previous year.

Taken together with loans, consolidated credit outstanding in the system stood at at Rs 127.87 lakh crore as of February 15, up 13.8% from Rs 112.32 lakh crore in the comparable period a year ago.

Meanwhile, deposits with the banking system grew by 10.2% y-o-y to Rs 121.21 lakh crore as on February 15, a shade faster than 9.63% y-o-y in the previous fortnight. During the comparable fortnight of 2018, deposits with banks had grown by only 5.9%.

The provisional data released by the RBI showed that outstanding loans to companies and individuals stood at Rs 93.41 lakh crore as on February 15, up from Rs 93.62 lakh crore on February 1 and Rs 81.76 lakh crore a year ago.

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The credit growth has shown a recovery from record lows over the past few quarters, with the banking system getting out of the impact of demonetisation and a bulk of lenders focused on retail lending. Bankers now sound increasingly optimistic about growth trends in credit offtake.

Jairam Sridharan, chief executive officer of Axis Bank, told analysts after bank’s Q3FY19 results that the loan growth during the quarter was strong. There was pick-up which was visible across all segments. “Banking system non-food credit growth continued its upward trajectory from multi-decade lows witnessed in the March quarter and stood at almost 12% for the latest fortnight, partly aided of course by the low base of last year,” Sridharan observed.

Led by 20% y-o-y retail loan growth and 13% loan growth in the SME segment, Axis Bank’s loan growth in Q3FY19 stood at 13% y-o-y.

The corporate lending business scaled up the loan growth of Housing Development Finance Corporation (HDFC), while the retail lending business was largely unaffected, said analysts at Motilal Oswal. “HDFC’s retail loan growth is impressive, despite intense competition and a high base. The next few quarters would be even better, given easing competition due to liquidity issues,” analysts observed.

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The loan growth at ICICI Bank maintained a steady pace at 12% y-o-y in Q3FY19. Muted loan growth in domestic corporate lending remains a drag as there is a large share of loans that the bank is looking to reduce its exposure,” said analysts at KIE. “Loans to domestic corporates were flat y-o-y whereas international lending (mostly wholesale) was down 5% y-o-y, a trend similar to previous quarters. Retail loans, however, continued to witness a strong growth at 22% y-o-y,” analysts observed.

Bank of Baroda has been reporting healthy traction in domestic loan growth while operating metrics are showing a gradual improvement, said analysts. “Loan growth has improved with better traction in domestic book with a pick-up in loan-deposit ratios,” observed analysts at Jefferies.

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