India’s Bank Credit Slump Continues in Current Fiscal Year

As of July 21, 2017, credit growth has decelerated by Rs 1.5 lakh crore, a new historic low.

A pedestrian walks past a logo of ICICI Bank at its headquarters in Mumbai January 30, 2015. Credit: Reuters/Shailesh Andrade/Files

A pedestrian walks past a logo of ICICI Bank at its headquarters in Mumbai, January 30, 2015. Credit: Reuters/Shailesh Andrade/Files

New Delhi: Bank credit growth of all of India’s scheduled commercial banks in the current fiscal has decelerated by a substantial Rs 1.5 lakh crore, according to data put out by the Reserve Bank of India (RBI) and the State Bank of India (SBI).

Credit growth, as of July 21, 2017, has slowed to a new historic low, both on a year-to-date (April-July) and year-on-year (July) basis.

“A depressed investment cycle, persisting excess capacity in manufacturing, and deleveraging on the part of corporates to improve their credit ratings have contributed to the slowdown in credit growth,” SBI chief economist Saumya Kanti Ghosh said in a report released on Thursday evening.

Bank Credit Growth
Financial Year    YTD Growth (April – July)     YoY Growth (July)
Rs billion % Change Rs billion % Change
2017-2018 -1527 -1.9% 4483 6.2%
2016-2017 -91 -0.1% 6126 9.2%
2015-2016 916 1.4% 5437 8.9%
2014-2015 1008 1.7% 6886 12.8%
2013-2014 1352 2.6% 6911 14.7%

From April 2017 onwards, a review of Indian banking system’s sectoral credit deployment also indicates that this decline in credit growth is seen across all sectors.

“The worrying thing is that pace of growth in personal loans (especially Housing) have been declining since September 2016, which was the growth driver among all the sectors,” Ghosh notes in the SBI report.

In the current fiscal, personal loans generally have seen the maximum incremental credit growth, mostly in the category of loans against pensions, insurance products and express credit. However, as a careful look at the data shows, this may not be proper credit growth but could also indicate a churning of investor portfolio.

“Credit card outstanding has continued to increase at the same pace as last year. Housing loans has witnessed only a marginal increase and that is a point of concern. Credit to service sector is also witnessing a loss in growth momentum. Credit to construction sector seems to be the only silver lining as off now,” the SBI report notes.

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