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India Financial Services
What Is Driving Credit Growth?
What's new: The Reserve Bank of India has released
sectoral/industry-wide data on credit growth as of
November 2010 (they will be releasing this on a monthly
basis going forward). Credit growth picked up to 22.3%
YoY in Nov-10 from 10% YoY in Nov-09. As of
mid-December, credit growth had accelerated further to
23.7%.
The key trends were:
a) Credit to large corporates drove 5.6% points of
acceleration in YoY growth over the past 12 months:
Large corporate growth picked up to 31% YoY as of
Nov-10 from 27% in Mar-10 and 14% in Nov-09. Growth
in credit to mid corporates and SME is still lagging
overall growth at 16.4% YoY and 16.9% YoY
respectively. However, mid-corporate credit growth has
started to pickup as is reflected in the fiscal YTD
numbers.
The key industries driving this growth include – telecom
driven by bank lending on account of 3G/BWA license
auctions (+91% YoY), power (+48% YoY), engineering
(+32% YoY) and food processing (+30% YoY).
b) Services sector growth picked up: Credit to
services segments accelerated to 23% YoY from 12.5%
in Mar-10 and 7.9% in Nov-09. Within this, the segments
driving growth are bank lending to non-banking financial
companies (+32% YoY), “other” services (+23% YoY),
transport operators (+39% YoY), computer software
(+39% YoY) and tourism/hotels (+69% YoY).
c) Personal loans growth accelerated but continued
to lag the system: Growth picked up to 12% YoY from
4% YoY in Mar-10 and 1% YoY in Nov-09. Mortgage
lending grew at 12% YoY accelerating slightly from 8%
YoY in Mar-10. Other sectors recording strong growth
include advances against fixed deposits/other financial
instruments, education loans, vehicle loans. Credit card
loans continued to contract and were down 17% YoY.
d) Bank lending MFI sector grew at 51% YoY: Bank
lending to micro-finance institutions (MFI) – which qualifies
as priority sector loans – was up 51% YoY and 30% fiscal
YTD. The outstanding amount is US$ 6.3 bn or 0.8% of
system loans. Given that the pressures for this sector
intensified in October/November – we will have to wait and
watch to see the trends going forward.
e) CRE segment growth picked up fiscal YTD:
Commercial real estate (CRE) lending has been another
area of worry. Outstanding bank loans to the sector amount
to US$ 23.5 bn or 3.1% of system loans. Lending to this
sector seemed moderate at 19% YoY – however, on a fiscal
YTD basis this book grew by 14.5%.
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