In the same month last year, home loans were growing at 16.5% over the preceding year
The consumer demand that was fuelling growth in the economy is slowly drying up. The pace of growth for most retail loans like education loans, car loans, credit cards, personal loans has come down sharply, according to monthly data provided by Reserve Bank of India (RBI). On the other hand, demand for industrial loans, especially large corporate loans, have picked up momentum owing to a continuous rise in bond market rates.
Mortgage loans witnessed a year-on-year growth of 18.8% in February 2019. In the same month last year, home loans were growing at 16.5% over the preceding year. However, personal loans reported the sharpest decline, growing only at 22.2% to Rs 5,94,600 crore as against 40.8% growth the segment reported at the same time last year.
Bankers say consumption demand has slowed down and investment cycle is yet to begin with most of the demand from the large industrial segments is for short-term working capital loans. There is hardly any demand for project loans or capex purposes.
Karthik Srinivasan, senior vice-president at Icra, said, "Due to tightness in the liquidity in the bond markets the differential between the bond market rates and the bank funds have shrunk. A year ago a triple-A rated company could secure funds at rates lower than 6.5% but now rates in the bond market have shot up as participants are risk averse."
With 11 banks under the RBI's prompt corrective action plan for the most part of the financial year, bank credit, especially in the unsecured segments, slowed down as lenders kept a tight leash on the growing non-performing assets (NPAs) that were eating into their profits. At the same time, all private sector banks have been growing their unsecured loans portfolio due to higher yields.
Banks are trying to cut back on unsecured credit. Credit card outstanding at the end of February 15, 2019, was at Rs 83,400 crore, growing only at 26.7% while at the same time last year it grew at 33.4%.
Among the industry segments, it is the large industry which absorbed most of the bank credit. Loans to large industries rose by 6.7%, higher than the 0.4% growth the segment reported in the same time last year, whereas the credit offtake by mid-corporates slowed down to 0.7% as against 2.3% it witnessed a year ago.
The failure of infrastructure financier IL&FS to repay its debt market commitments led to tightness in liquidity and prompted banks to turn risk-averse. But since the NBFCs were growing their retail book especially priority sector loans for housing banks began buying out loan portfolios which led to beefing up of the bank credit to NBFCs. The bank finance for NBFCs rose 47.5% to Rs 5,75,400 crore over the previous year, higher than the 22.2% it reported last year.
The commercial real estate segment also benefitted with banks lending to special purpose vehicles framed for specific building projects. The bank finance for CRE grew 10.3% over the previous year to Rs 1,98,800 crore.
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