Sectoral deployment of credit
50%+ of all sectors show significant decline for Feb-12
Less than half of the sectors reported growth at above 2/3rd of last year
Growth in non-food credit continues to remain fragile with credit growth for Feb-12 stood at 15.4% yoy against 22.8% yoy for period ended Feb-11 and marginally higher 16% yoy for Jan-12. Prolonged period of elevated interest rates coupled with slowing investment demand has resulted in muted credit growth.
Significant slow down was witnessed in the segments of loans to agriculture (+8.1% yoy vs 18.3% yoy in Feb-11), medium (+17% yoy vs 37% yoy in Feb’11) and large scale (20%yoy vs 30%yoy in Feb’11) industries, commercial real estate (+ 12% yoy vs 18% yoy in Feb’11) and consumer durables (-13.3% yoy vs 24% yoy in corresponding period of the previous year). Nearly 12 out of 23 sectors witnessed a credit growth which was lower than two-thirds of credit growth for the last year. On the flip side, growth continues to remain buoyant in few pockets of NBFC (+31%yoy), Credit cards outstanding (+11% yoy vs -10%yoy for Feb’11) and more towards secured assets like housing loans (+11% yoy), education loans and vehicle loans.
… YTD growth continues to remain lower when compared with last year
The YTD growth for Feb-12 stood at 11.7% vs. 16.8% in the corresponding period last year. However, on a m-o-m basis, growth momentum has picked and could largely be attributable to year-end phenomenon. 10 of 23 sectors have reported YTD growth at rates less than two-thirds of the growth in Feb-11 including agriculture (3%), NBFC (18%), Consumer durables (-14%), CRE (8%), and other personal loans (6%).
Sectoral credit composition has tilted more in favor of Industries
While the sectoral credit composition has remained more or less flat m-o-m, over the past 12-months, the share of industries has risen by ~150bps led by 130bps increase in market share for large industries and now accounts for 35% of total non-food credit.
Industry credit still showing resilience…
Within industrial deployment slow down was witnessed in the loans to textiles (10% yoy vs 21% yoy in Feb-11), Petroleum, Coal products and Nuclear Fuels (-9% yoy), Cement and cement product (16.5% yoy vs 34.1% yoy) and Basic metals (+22% yoy vs 29% yoy in corresponding period of the previous year). 16 out of 33 industries witnessed a credit growth which was lower than two-thirds of credit growth last year.
On the flip side, healthy growth was witnessed in segments of mining (+40% yoy), Electronic engg (26% yoy), vehicles, vehicle part and transport equipment (+25% yoy) gems and jewelry (29% yoy).
… Even as YTD growth shows some deceleration
YTD growth for Feb-12 for loans to industry stood at 16% vs. 20% for the same month last year and up from 14% in Jan-12. YTD growth has remained buoyant in segments of Mining (32%), Paper and paper products (17%), Fertilizer (33%), Electronic engg (26%), vehicle, vehicle parts (17%) and gems and jewellery (24%).
Outlook
With non-food credit growth at 16.2% yoy (latest reported fortnightly data), we expect overall credit growth for FY12 to come in at ~16% yoy (assuming a 2% f-o-f# increase in credit demand). Lower investment and consumption demand coupled with longer than expected timeframe towards easing monetary policy rates are likely to act as barriers for credit growth. Further, persistently higher negative LAF balances and hefty borrowing programme is likely to make situation grim in FY13. For banks under our coverage we have built in loan growth assumptions of 16% / 17% for FY12E / FY13E respectively.
Note: Sources for all tables RBI, Emkay Research # denotes fortnight-over-fortnight
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