HDFC Securities on Banks: Sector Credit Trends, Growth continues to moderate | Personal loan growth impacted most by COVID-19
Industrial credit degrew (-1.7% YoY) for the first time in 3 years, and this trend was led by large industrial credit, which degrew 2.9% YoY. On a YTD basis, overall / large industrial credit de-grew 5.7/6.7%. Aided by disbursals under the MSME credit guarantee scheme, growth in credit to medium industries continued to accelerate, reaching 16.7%, even as MoM growth slowed from 11.9% in September to 2.4%. Within industrial credit, sectors such as gems and jewellery, glass and glassware and all engineering including electronics saw persistent YoY degrowth, together, these constitute 18.4% of industrial credit.
The downtrend in non-food credit growth persisted, unsurprisingly, with YoY growth reaching 5.6%, the slowest in a little over 3 years. This trend was led by a degrowth in industrial credit and sluggish personal loan and service credit growth. HDFC Securities expects non food credit growth to remain range bound in the near term, as an uptick in disbursals will continue to be met by a corresponding rise in repayments, which have increased significantly, as suggested by Q2 FY21 commentary.
Industrial credit degrew (-1.7% YoY) for the first time in 3 years, and this trend was led by large industrial credit, which degrew 2.9% YoY. On a YTD basis, overall / large industrial credit de-grew 5.7/6.7%. Aided by disbursals under the MSME credit guarantee scheme, growth in credit to medium industries continued to accelerate, reaching 16.7%, even as MoM growth slowed from 11.9% in September to 2.4%. Within industrial credit, sectors such as gems and jewellery, glass and glassware and all engineering including electronics saw persistent YoY degrowth, together, these constitute 18.4% of industrial credit. Infrastructure, which constitutes 36.5% of industrial credit, de-grew 2% YoY, 1.6% MoM and 5.2% YTD. Credit to the power sector, which accounts for 55.3% of infrastructure credit, de-grew 1.3% YoY. After growing rapidly between February 2019 and June 2020, credit to the telecom sector de-grew 20.8% YoY, 12.1% MoM and 29.8% YTD.
Service sector credit growth accelerated slightly from 9.1% in September to 9.5% in October. A major driver of this trend was growth in trade credit, which reached 14% YoY, vs. 11.5% in September, with growth in both wholesale and retail trade credit accelerating. The NBFC and CRE (Customer Relations Executive)sectors, which constitute 30.2% and 8.9% of overall service sector credit saw slowing credit growth, with YoY growth in credit to the sectors reaching 9.2% and 3.5% respectively.
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Personal loan growth, which has been impacted the greatest by COVID-19, continues to witness relatively sluggish growth. YoY growth came in at 9.3%, with growth in credit card debt slowing to 4.9% (consistently from the recent peak of 7.9% in July). Growth in home and auto loans languished at 8.2% and 8.4% respectively.
Agricultural credit growth continued to accelerate, reaching 7.4% YoY
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