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MOSL: ECOSCOPE-Credit growth weakens to 5-year low in 2QFY20

ECOSCOPE: Credit growth weakens to 5-year low in 2QFY20

 

• In 2QFY20, bank credit growth weakened to 8.1% YoY from 11-12% YoY seen in the past many quarters. However, as banks currently account for only ~56% of the total debt to the non-government non-financial (NGNF) sector in the Indian economy, an analysis of NGNF debt based only on this traditional sector does not provide a complete picture. Therefore, we have prepared a quarterly estimate of NGNF debt in the country, which includes the five sources of non-banking lenders, namely, non-banking finance companies (NBFCs), housing finance companies (HFCs), corporate bonds (CBs), commercial paper (CP) and external commercial borrowings (ECBs).
• After adjusting for the inter-financial transactions, our estimates suggest that NGNF debt grew 9.3% YoY in 2QFY20, marking the slowest growth in almost five years. It, however, stayed high at ~80% of GDP in 2QFY20. Slower growth by banks, NBFCs, HFCs and CPs explain the low credit growth last quarter, which was only partly offset by bonds and ECBs.
• Further, while household debt continued to grow at robust >15% YoY, non-financial corporate (NFCs) debt increased only 5.4% YoY in 2QFY20, marking the slowest growth in at least eight years. Thus, household debt has moved to record high of 33.6% of GDP, while NFC debt was at 13-quarter low of 46.8% of GDP last quarter.