Analysts see further decline in credit growth

According to data released by the Reserve Bank of India (RBI), the growth rate of outstanding loans in the personal segment was only 10.6% year-on-year in August 2020, compared to 15% in March 2020.

Non-food credit growth could slow further from the current low of 5.3 percent in three years (year-on-year) as disbursements decline and repayments increase. Analysts who follow the banking industry have said that a decline in personal lending growth is slowing overall credit growth and that may not change anytime soon.

On Monday, HDFC Securities said in a note that the slowdown in the growth rate is not a surprise as disbursements from banks are likely to have been reduced while repayments have gradually improved. “We believe that a further reduction in non-food credit growth is inevitable. Moderate disbursement trends and an increase in repayment rates from current levels after the end of the moratorium are expected to limit growth, ”analysts at the brokerage said.

According to data released by the Reserve Bank of India (RBI), the growth rate of outstanding loans in the retail segment was only 10.6% year-on-year in August 2020, compared to 15% in March 2020. Some pockets of low-cost loans, however, are experiencing a recovery.

Motilal Oswal Financial Services (MOFSL) said that, in line with its discussions with banks, the growth momentum in retail is accelerating, with segments such as tractors, two-wheelers, gold loans and affordable housing experiencing the fastest improvement. “Overall, we believe the recovery in high priced retail loans, CVs (commercial vehicles) and business demand would be much slower,” MOFSL analysts said.

National Bank of India‘s (SBIThe research wing said additional bank credit, which increased in June and July by Rs 39,200 crore, declined in August by Rs 36,000 crore. This is mainly due to a decline in credit in the retail and infrastructure segments. Consumer debt also fell in August, SBI Research said. “Consumer deleveraging which fell by Rs 53,023 crore in June 20 improved to reach Rs 14,111 crore in August 20,” SBI researchers said, adding: “Now the question is how much of this consumer deleveraging is due to foreclosure / Lack of activity and how much is because the consumer actually maintains discipline in consumer behavior. ”This could be crucial in deciphering the direction in which quality of banks’ assets will change during FY21.

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