Personal loans lead in SCB credit disbursals

by Janaki Samant

Outstanding non-food credit deployed by scheduled commercial banks (SCBs) as of end-September 2021 was Rs.62 billion higher than the outstanding credit as of end-March 2021. During the similar period of 2020, outstanding credit had declined by Rs.1.1 trillion. A decline in outstanding credit by end-September over end-March implies that fresh credit disbursed by SCBs was lower than the repayments made by borrowers during the period.

Non-food credit disbursal had taken a big hit last year because of the impact of the first wave of the Covid-19 pandemic and the consequent imposition of the countrywide lockdown since end-March 2020. Non-food credit deployment by SCBs has improved in the first half of the current fiscal year.

The recovery in credit flow was led by improvement in disbursals for personal loans and credit to agriculture & allied activities. Outstanding credit for industry and services sector declined. Outstanding personal loans increased by Rs.730.1 billion by end-September over end-March. This was higher than the Rs.147.6 billion loans disbursed during the corresponding period of 2020. However, the recovery was not complete as outstanding loans in the corresponding pre-pandemic period had increased by over Rs.1 trillion.

Within the category of personal loans, housing loans form the largest segment. Outstanding housing loans by SCBs increased by Rs.200.9 billion. This was a very marginal improvement compared to the increase of Rs.193.6 billion during the corresponding period of 2020. This is also significantly lower than the housing loans disbursed in the range of Rs.540-950 billion during the comparable period of 2015 to 2019.

There are signs of recovery in the demand for home purchases. As per media reports, home sales in India’s eight leading markets showed a 60 per cent jump during July-September 2021 when compared to the sales during the same quarter of 2020. On a sequential basis, the recovery was sharper, with a 250 per cent rise. Record low housing interest rates and incentives offered by developers are expected to boost home sales. Demand is also likely to have picked-up during the festive season. A revival in housing sales is expected to reflect in higher disbursals of home loans by SCBs.

In case of vehicle loans, outstanding credit increased by Rs.30.3 billion by end-September over end-March 2021. This is a recovery as outstanding credit had declined by Rs.33 billion during the comparable period of 2020. Though there has been a revival in vehicle demand, a shortage of semi-conductor chips has become an impediment in a corresponding rise in production leading to a long waiting period for car buyers. This will adversely impact the recovery in the offtake for vehicle loans, as well.

Outstanding credit for consumer durables increased by Rs.20.9 billion from end-September over end-March. During the similar period of 2020, outstanding credit had declined by Rs.26 billion. With the ongoing festive season, demand for consumer durables and consequently credit to buy the same is expected to improve further. Outstanding ‘other personal loans’ increased by Rs.454 billion. During the comparable period of 2020, outstanding loans had contracted by Rs.87.7 billion. Though there has been a strong recovery in this category, it still falls short of the loans disbursed during the pre-pandemic period.

Outstanding credit for agriculture and allied sector increased by Rs.502.8 billion by end-September over end-March 2021. This was higher compared to the increase in outstanding credit of Rs.397.2 billion by end-September over end-March 2020.

Flow of SCB credit to services sector has worsened. Outstanding credit to services sector declined by Rs.758 billion by end-September 2021 over end-March 2021. During the corresponding period of 2020, the decline was lower at Rs.280.1 billion. Decline in outstanding credit for NBFCs and wholesale trade contributed to this fall. Outstanding credit as of end-September 2021 declined by Rs.180.2 billion for wholesale trade and by Rs.611.2 billion for NBFCs over outstanding credit as of end-March 2021.

Outstanding credit to industry contracted by Rs.662.4 billion by end-September 2021 over end-March 2021. This was almost half of the Rs.1.2 trillion fall during the corresponding period of 2020. This improvement can be attributed to a recovery in credit disbursement to micro & small and medium industries. Outstanding credit to this segment increased by Rs.506.1 billion by end-September over end-March 2021. During the corresponding period of 2020, outstanding credit had increased by Rs.30.4 billion. In May 2020, the government had announced the Emergency Credit Line Guarantee Scheme (ECLGS) to provide collateral free loans to the micro, small & medium enterprises (MSME) sector. This is likely to have contributed to the sharp improvement in the credit disbursal to this sector. The scheme which was supposed to end on 30 September 2021 was extended further to 31 March 2022. This is expected to boost credit flow to the MSME sector in the coming months.

Though credit to the MSME sector increased, outstanding credit to large industries declined. It declined by Rs.1.17 trillion by end-September over end-March 2021. During the corresponding period of 2020, outstanding credit had declined by Rs.1.24 trillion. Slowing investment spending and alternative sources of raising credit could be the cause for weak demand for SCB credit from large industries.

While the Rs.62 billion increase in non-food credit disbursal in the first half of the current fiscal year is an improvement over the previous year’s decline it is still much lower than the Rs.2 trillion to Rs.10.7 trillion increase in credit disbursals during similar periods of 3 of the 4 years from 2016-17 through 2019-20. There is therefore a long way to go before we see a convincing increase in disbursal of non-food credit by SCBs.

Note: From March 2021, outstanding data on bank credit and non-food credit covers all SCBs. But the sectoral break-up of non-food credit are based on data from banks accounting for about 90 per cent of total non-food credit extended by all SCBs. Prior to this change, outstanding data on bank credit, non-food credit and its sectoral break-up was based on 90 per cent of total non-food credit extended by SCBs. Because of the change, the sectoral breakup of outstanding credit does not add up to non-food credit. It is around 90 per cent of the non-food credit data. To illustrate, outstanding non-food credit as of end-September was Rs.108.9 trillion, but if the components are added, then it gives outstanding credit figure of Rs.96.4 trillion. Consequently, incremental non-food credit during April-September 2021 was Rs.62 billion but the sum of the components gives negative incremental credit of Rs.187.5 billion for the same period.

CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.0 +0.3
Consumer Sentiments Index
Base September-December 2015
60.3 0.0
Consumer Expectations Index
Base September-December 2015
62.1 +0.5
Current Economic Conditions Index
Base September-December 2015
57.5 -0.8
Quarterly CapEx Aggregates
(Rs.trillion) Dec 20 Mar 21 Jun 21 Sep 21
New projects 1.50 2.22 2.63 2.05
Completed projects 0.87 1.17 0.72 1.06
Stalled projects 0.30 0.26 0.32 0.03
Revived projects 0.15 0.22 0.12 0.25
Implementation stalled projects 0.20 0.32 0.25 0.22
Updated on: 27 Nov 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Dec 20 Mar 21 Jun 21 Sep 21
All listed Companies
 Income 1.6 15.1 39.3 27.8
 Expenses 0.1 7.4 38.9 27.2
 Net profit 58.1 330.6 134.8 52.9
 PAT margin (%) 8.4 8.8 9.0 9.7
 Count of Cos. 4,456 4,376 4,460 4,463
Non-financial Companies
 Income 0.2 17.8 56.4 35.8
 Expenses -0.7 10.6 57.4 36.3
 Net profit 52.1 223.4 200.8 59.5
 PAT margin (%) 8.8 9.0 8.5 8.9
 Net fixed assets 2.3 13.9
 Current assets 4.3 17.3
 Current liabilities 0.8 7.1
 Borrowings -4.3 21.1
 Reserves & surplus 11.7 18.6
 Count of Cos. 3,281 3,239 3,290 3,265
Numbers are net of P&E
Updated on: 27 Nov 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.3 -2.2
 Expenses 13.6 0.3 -4.5
 Net profit 15.1 -11.1 46.8
 PAT margin (%) 2.1 2.1 6.8
 Assets 9.8 8.6 12.5
 Net worth 8.5 4.6 13.5
 RONW (%) 3.7 3.5 8.8
 Count of Cos. 32,262 31,180 7,893
Non-financial Companies
 Income 14.0 -1.5 -4.5
 Expenses 14.2 -1.2 -6.3
 Net profit 21.6 -20.7 36.0
 PAT margin (%) 2.9 2.4 6.4
 Net fixed assets 5.6 10.4 1.9
 Net worth 7.9 2.3 11.3
 RONW (%) 6.4 5.0 9.9
 Debt / Equity (times) 1.0 1.1 0.7
 Interest cover (times) 2.3 1.9 3.5
 Net working capital cycle (days) 74 81 66
 Count of Cos. 25,777 24,849 5,777
Numbers are net of P&E
Updated on: 19 Nov 2021 9:14PM