Vehicle loans and credit cards are growing at the fastest pace among all segments of bank credit.
According to the consolidated date of all scheduled commercial banks published by the Reserve Bank of India (RBI), vehicle loans segment, which is dominated by passenger car loans, grew 18.2% over the previous year (year-on-year), much higher than 12.3 % recorded in the year ago period. Vehicle loan outstanding at the end of February 17, 2017 stood at Rs 1.6 trillion (lakh crore).
Credit cards was the next big moving product reporting a year-on-year growth of 28.2%. In the corresponding period a year ago, the pace of growth was lower at 23.2%. Banks had a credit card outstanding of Rs 49,300 crore. This is the fastest growing segment in the bank credit and it shows Indian are getting comfortable living off credit. With higher yields on these loans, banks are also marketing them in a big way with cash back offers and other freebies.
Arundhati Bhattacharya, chairman, SBI, said, “Investment spending is very low. But consumption spending is still happening.”
Bank credit growth is growing at 3.3% over the previous year, the lowest in more than a decade and the year to date growth (March 2016 to February 17, 2017) which captures the growth during the year is at an abysmal at 1.9% with most segments of bank credit degrowing. Even the retail segments which were growing at a healthy pace has started to slow down.
Housing for example which was growing at 17% year-on-year has slowed down to 11.4% and year to date growth is only at 9.8%. Personal loans which comprises all retail loans reported a year-to-date growth of 10.6%. The year-on-year growth of 12 %, was much lower than19.2% reported the same time in the preceding year.
Bank credit to large industry degrew 4.4% to Rs 21.44 trillion, while for the medium scale industries it degrew by 12.5 to Rs 1 trillion. With most companies raising money though commercial papers and corporate bonds the bank credit market is now dominated by retail loans.
Nomura said in a research note, “We believe the current recovery cycle will be less credit-intensive and we expect system growth to remain around 9-10% CAGR (compounded annual growth rate) over FY17-19F, with corporate loans growing at just 6-7% CAGR and retail book (ex mortgages) growing at +15% CAGR. While valuations for the sector are demanding now, in the context of overall slow credit offtake, companies with better growth profile will continue to command premium valuations, in our view."
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