Sectoral deployment of credit Growth moderation led by services and personal loan :Emkay

Non-food credit growth at 16.5% yoy; Service and personal loans report
credit growth at less than 2/3rd of previous period
Recent RBI data reveals that non-food credit growth has eased to 16.5% yoy for the
month of April-12 against 17% yoy for March-12 and 22.1% yoy in the corresponding
period of previous year. While credit to segments of agriculture (14.6% yoy) and
industries (19.5% yoy) remains healthy, major disappointment was witnessed in
exposure to segments of – a) services (15.8% yoy vs 24.1% yoy in Apr-11) and b)
personal loans (11.5% yoy vs 18.4% yoy in Apr-11). 13 of 23 sectors have reported
credit growth at less than 70% of growth for Apr-11 and is clearly reflective of growth
moderation due to elevated interest rate and uncertain business dynamics. Amongst
services segment – credit to CRE (6% yoy vs 22% yoy in Apr-11), NBFC (36% yoy vs
56% yoy in Apr-11) and other services (9% yoy vs 16% yoy in Apr-11) reported lower
growth. Personal loans was dragged by lower growth in sectors of – consumer durables
(-16% yoy) and housing loans (11% yoy). On the positive side : Growth was witnessed
in sectors of trade (19.1% yoy), wholesale trade (24% yoy), large ind. (22.4% yoy) and
secured asset class like vehicle loans (19.4% yoy) and education loans (14.5% yoy).
… sectoral credit composition still in favor of Industries
Growth moderation in credit to segments of services / personal loans as enabled the
share of industries to continue remain at high at 46% for Apr-12. However, a lower
PCFE and a muted growth in GCF as reflected in Q4FY12 GDP data suggest growth
moderation in coming periods.

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Broad based credit growth amongst industries
Industrial credit growth for the month of April-12 came in healthy at 19.5% yoy (21.3% in
Mar’12 and 26% yoy in Apr’11) and was a broad based growth across all segments.
Mere 9 / 33 sectors (ie 27% of sectors) reported credit growth at less than 2/3rd of
previous period. Amongst industries – growth was witnessed in sectors of basic metals
(21.5% yoy), other industries (47.4% yoy), food processing (18% yoy), chemicals
(19.2% yoy), infrastructure (14.1% yoy), textiles (9.5% yoy), and all engineering
(22.5%). These sectors cumulative account for 80%+ of total industries. On the flip side
– credit to sectors of Power (16.8% yoy), roads (19.7% yoy) and cotton textiles (7% yoy)
has eased materially.
Overall breakup remains largely stable
On a y-o-y basis, the overall industry-wise credit has remained largely stable with share
of Infrastructure (31.5%), Basic metals (13.1%) and textiles (8.2%).
Outlook
Non-food credit data has raised concerns over material slowdown in credit to segments
of services (16% yoy vs 24% yoy in Apr-11) and personal loans segment (11.5% yoy vs
18.4% yoy in Apr-11). A lower services sector growth will have a direct impact on GDP
(Q4FY12 service sector growth at 7.9% yoy was dragged by lower growth in sectors of
trade, hotels, transport & communication at 7.0% yoy vs 11.6% yoy in Q4FY11 and 10%
yoy in Q3FY12). The deceleration in credit growth towards personal loan segment –
consumer durables (-16% yoy) and mere 11% yoy growth in housing loans reflects
slowing consumption demand. Concerns of twin deficit, recent INR depreciation and
lower GDP growth remain key challenges in near term.
Note: Sources for all tables RBI, Emkay Research # denotes fortnight-over-fortnight