Strong NBFCs find it easy to raise funds from banks; retail sector loan growth drops
Despite the NBFC crisis, bank credit to the sector continued to grow.
NBFCs saw bank credit rise 37.6% to Rs 6,35,100 crore as on June 21, 2019, over the year-ago period. On June 21, 2018, the growth rate was 35.4%. While the housing finance companies are finding it difficult to source finance from the banks, other NBFCs with strong parental support and government-owned NBFCs are able to get money from banks. Bank credit to commercial real estate companies has also risen by 10.35% to Rs 2,05,500 crore as of June 21.
Sunil Mehta, managing director and chief executive officer of Punjab National Bank (PNB), said, "The rise in NBFC credit is because many of the strong NBFCs with a good parental organisation are picking up bank credit and staying well-capitalised. The government-owned NBFCs are also picking up credit, which is helping the credit to the sector to grow. Banks are selectively lending but have not stopped altogether."
But bank credit is yet to pick up steam across the sectors with gross bank credit growth staying flat at 11.1% as of June 21 over the previous year to Rs 85,47,600 crore.
While industrial credit grew 6.4% over the previous year to Rs 28,12,000 crore, large industries have picked up the biggest chunk of bank credit at Rs 23,40,700 crore, growing at 7.6% over the year-ago period as companies lined up for working capital requirements. The medium-scale industries have loans outstanding of Rs 1,05,200 crore of the total credit, growing at 2.2% over the year-ago period.
The credit to the services sector slowed to 13% as on June 21, at Rs 22,84,700 crore, while in the year-ago period the credit was growing at 23.3%.
With bankers turning cautious due to slowdown, retail loans are losing pace, with the segment growing 16.6% as of June 21 as against 17.9% a year ago. Home loans reported a robust growth at 18.9% as against a 15.8% growth in the year-ago period, while vehicle loans showed the sharpest drop in growth at 5.1% to Rs 2,00,400 crore while in the year-ago period these loans were growing at 11.1%.
Unsecured credit like credit cards and personal loans has lost steam. Credit card outstanding at the end of June 21, 2019, stands at Rs 94,900 crore, growing at 27.5% over the previous year as against a growth of 31.1% in the year-ago period. Personal loans are growing at 23.2% to Rs 6,25,600 crore while in the year-ago period these loans were growing at 27.5%.
OPINION
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BANKERS ARE LENDING SELECTIVELY In the last financial year, bank credit was growing at 13% to 14%, but the growth has slowed down substantially with the NBFC crisis. Banks are slowing credit to the NBFC sector because many lenders are hitting their exposure limits so are curtailing credit. Banks are also slowing credit to the retail segment as it is growing much faster than other segments. So bankers while trying to stay cautious are very selectively growing their loan book. ―Anil Gupta, vice-president, financial sector ratings, Icra
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But bank credit is yet to pick up steam across the sectors with gross bank credit growth staying flat at 11.1% as of June 21 over the previous year to Rs 85,47,600 crore.
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