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Event update: Financials - Sectoral deployment of credit – Aug’18

According to the sectoral deployment of credit, sector loans have grown 12.2% yoy, 2.4% qoq and 1.9% mom as at end Aug’18. Non-food credit grew 12.4% yoy compared to 10.6% yoy in July-18, on the back of continued strong retail growth and a pickup in credit to industry though on a low base. The yoy growth looks high partly driven by the base effect of GST. However mom also growth has picked and is stronger than in the first four months of FY19 driven by rising yields that drove borrowers to switch to bank credit from bonds. Services and personal loan growth remains robust and much higher than the industrial growth and hence we continue to prefer retail banks.

Key highlights

• The pick-up in yoy growth in non-food credit is partly driven by the base effect of GST. The mom growth of 1.9% is higher than the mom growth in the first four months as borrowers move from debt markets to bank funding given rising yields. We expect the mom growth to remain high at least till December given the current nervousness in debt markets.
• Industry/Corporate credit revives after many quarters to post a growth of 1.9% yoy/0.9% mom, with Mid-corporates posting the higher growth of 6.5% yoy/2.9% qoq/1.7% mom and MSME at 2.6% yoy/1.4% qoq/1.9% mom.
• In the industry wise corporate credit breakdown Infrastructure continued its uptrend at 4.3% yoy and 1.8% mom from 2.2% yoy and 1.9% mom in July’18, other notable segment was fertiliser with a growth of 7.7% yoy and 2.9% qoq.
• Within infra, roads and telecom registered a higher growth of 5.8% mom and 2.9% mom respectively.
• After a marginal deceleration in July retail loan growth again inched up to 20.8% yoy in Aug’18 compared to 18.5% in July’18 and 19.8% in June’18. Within retail loans, housing (at 17.0 yoy /3.5 mom), c drivers.
• Total home loans grew 17.0% yoy and 3.5% mom with a lower incremental contribution from priority housing. Growth in non-priority housing loans came in at 22.8% yoy in Aug’18 from 21.8% yoy in July’18 while growth in priority home loans witnessed a marginal fall to come in at 8.6% yoy / 1.1% mom
• Growth in credit outstanding for cards saw a sharp uptick at 37.4% yoy and 5.7% mom from 30.8% yoy and -0.2% mom in July’18
• Growth in trade has again picked up after slowing down for two quarters to 16% yoy / 2.7% mom from 14.0% yoy / -1.6% mom in July’18, within trade segment, growth in wholesale was higher at 3.8% mom than that of retail at 1.9% mom.

·       Growth in micro credit inched up further to 41.4% yoy /2% mom in Aug’18 against 40.3% in July’18 and 38.7% in June’18. The yoy growth is on a low base.