Bank credit growth slows down

by Janaki Samant

Disbursement of bank credit disappointed in May 2022. Outstanding non-food credit disbursed by scheduled commercial banks (SCBs) in May was a mere 0.5 per cent higher than it was in April. April 2022 had recorded an increase of 0.6 per cent in outstanding credit.

Usually, outstanding non-food bank credit declines in April compared to March. This is because March witnesses an unusual seasonal increase in bank lending at the end of the fiscal year. But, in 2022, outstanding non-food credit by scheduled commercial banks, surprisingly, increased in April. This seemed to suggest a revival in demand for bank credit. However, data for May belies hopes of such a revival.

In May 2022, none of the segments of non-food credit showed any strong pick-up in credit demand. Increase in personal loans and credit disbursed to agriculture & allied sectors turned out to be even lower than in April. In case of industry and services, credit disbursed was higher in May compared to that in April. But growth remained lacklustre at below one per cent.

Personal loans had been growing at a robust pace till recently. It is likely that a combination of high inflation and rising interest rates have arrested this growth. Also, consumer sentiments were quite subdued in May.

Growth in outstanding personal loans slowed to 0.7 per cent in May compared to 1.7 per cent in April. These had been increasing in the range of one to four per cent since November 2021. In absolute terms, disbursements dropped to an 8-month low of Rs.248.2 billion during May 2022. Even in April, loan offtake was higher at Rs.571.7 billion. Housing loans, vehicle loans, loans for consumer durables, credit card loans and other personal loans are some of the important subgroups within personal loans. Barring other personal loans, growth in outstanding loans to rest of these categories slowed in May.

Housing loans make up the largest segment within personal loans, accounting for 50 per cent of total personal loans. These grew by Rs.26.3 billion in May 2022. This was a much smaller increase compared to the Rs.218.6 billion increase seen in April. Housing loans disbursed in May turned out to be the lowest since August 2021.

A similar though less pronounced slowing down is evident in vehicle loans. From Rs.108.7 billion in April, these dropped to Rs.48.1 billion in May.

Increase in outstanding credit on credit cards slowed sharply - from an average of Rs.41 billion per month during February through April to Rs.4.6 billion in May. But, data released by the RBI shows that credit card spending in May 2022 was at an all-time high of Rs.1,137 billion. It was 8 per cent higher over the spending in the preceding month. Consumers spent more online compared to the amount spent in shops. Apparently, consumers were spending more on credit but were settling their credit bills quickly as well.

Disbursal of loans for consumer durables has been increasing at about Rs.7 billion per month. In March and April, this shot up to Rs.10.3 billion and Rs.12.8 billion. In May, the disbursals reverted back to Rs.7 billion. The acceleration seems to have petered out.

High inflation and high interest rates have likely subdued demand. This view is supported by the news that consumer electronics and smartphone makers have decided to extend their production cuts till August. They have also deferred plans for ramping up output for the festive season by a month, as demand continues to be subdued. This will hit demand for personal loans, as well.

Other personal loans is a category within personal loans. It makes up almost 25 per cent of outstanding personal loans. Credit to this segment grew by 2.1 per cent in May, same as the growth in April. But, this comes over a 12.9 per cent decline in March.

Bank credit disbursements for the services sector improved in May. During the month, credit offtake increased by Rs.244.4 billion. This was substantially higher than the increase of Rs.16.5 billion in April. But the increase in May was lower than the average increase of Rs.563.4 billion recorded during the January-March 2022 quarter.

Credit to industry had shown signs of a revival in the second half of 2021-22 after remaining subdued in the past. But, this growth has failed to sustain in recent months. Growth in outstanding credit to industry has remained below one per cent since March 2022. In May, credit increased by a mere 0.4 per cent.

High inflation has reportedly led to drawdown of unutilised credit limits of corporates borrowers. This is because a rise in cost of raw materials led to higher working capital requirement for corporates. But this did not lead to a substantial increase in credit to industries. Outstanding credit to large industries increased by a mere 0.2 per cent in May. It had declined by 0.4 per cent in March and 0.7 per cent in April. Increase in credit to micro & small and medium enterprises was also lower in April compared to that in May.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.7 +0.7
Consumer Sentiments Index
Base September-December 2015
71.1 -0.5
Consumer Expectations Index
Base September-December 2015
69.7 -0.8
Current Economic Conditions Index
Base September-December 2015
73.3 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Sep 21 Dec 21 Mar 22 Jun 22
New projects 3.39 3.94 7.78 4.23
Completed projects 1.28 2.76 1.26 1.07
Stalled projects 0.28 0.08 0.28 0.25
Revived projects 0.39 1.98 0.32 0.28
Implementation stalled projects 0.26 0.65 0.09 0.08
Updated on: 19 Aug 2022 8:28PM
Quarterly Financials of Listed Companies
(% change) Sep 21 Dec 21 Mar 22 Jun 22
All listed Companies
 Income 27.5 23.4 20.9 40.6
 Expenses 26.7 21.3 19.9 42.0
 Net profit 55.8 35.4 31.1 20.8
 PAT margin (%) 9.6 9.0 9.0 7.4
 Count of Cos. 4,696 4,742 4,615 4,494
Non-financial Companies
 Income 35.6 29.1 24.9 50.7
 Expenses 35.9 28.7 25.7 53.9
 Net profit 59.4 19.1 11.3 7.8
 PAT margin (%) 8.8 7.5 7.8 6.0
 Net fixed assets 4.9 2.1
 Current assets 10.9 15.2
 Current liabilities 0.8 11.7
 Borrowings 12.2 3.6
 Reserves & surplus 12.4 11.4
 Count of Cos. 3,384 3,428 3,347 3,282
Numbers are net of P&E
Updated on: 19 Aug 2022 8:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -1.0 23.3
 Expenses 0.4 -3.2 21.6
 Net profit -5.8 73.3 56.0
 PAT margin (%) 2.0 4.4 9.8
 Assets 9.0 9.9 10.4
 Net worth 4.8 11.7 13.2
 RONW (%) 3.4 6.8 13.8
 Count of Cos. 32,624 30,686 2,465
Non-financial Companies
 Income -1.1 -2.0 31.4
 Expenses -0.9 -4.1 30.9
 Net profit -22.0 64.3 53.5
 PAT margin (%) 2.2 4.0 8.9
 Net fixed assets 11.2 2.2 4.3
 Net worth 2.1 10.7 14.0
 RONW (%) 4.6 7.8 17.2
 Debt / Equity (times) 1.2 1.0 0.6
 Interest cover (times) 1.9 2.4 6.5
 Net working capital cycle (days) 82 86 51
 Count of Cos. 25,818 24,102 1,800
Numbers are net of P&E
Updated on: 12 Aug 2022 10:17AM