Credit card growth beats home loan

MUMBAI: Bank loans to businesses and services continued to shrink in the first four months of FY18 with most incremental lending taking place by way of credit cards and personal loans. Overall bank credit growth during the current fiscal (as on August 18) continued to be at a historic low with banks’ loan book shrinking by Rs 1.37 lakh crore to Rs 77.04 lakh crore.

Data released by the Reserve Bank of India (RBI) showed that credit cardoutstandings grew Rs 4,600 crore (9%) to Rs 56,800 crore and auto loans rose Rs 2,000 crore (1.2%) to Rs 1,72,600 crore in the first four months of FY18 up to July. During the same period, home loan growth slowed down to 0.4% with the housing portfolio of banks increasing by a mere Rs 3,600 crore to Rs 8.64 lakh crore

The slowdown in home loans could be attributed to the slump in real estate segment coupled with SBI’s merger with associate banks, which resulted in branches going slow in disbursements of retail loans as the bank focused on rationalising its branch network.

Overall bank credit shrunk by Rs 1.95 lakh crore during the period. The biggest drop was in loans to non-banking finance companies. Banks’ portfolio of loans to finance companies shrunk by Rs 53,500 crore to Rs 3,37,500 crore. One reason for this could be that several microfinance companies converted into small finance banks during the period.

According to Soumya Kanti Ghosh, chief economist, SBI, the deceleration in credit growth also highlights the role of supply side factors — stressed assets and capital constraint — in hindering a revival in the credit cycle. “The sectoral data on flow of credit indicates that deceleration in credit, though broad-based, is characterised by a sharp contraction in exposure to industry,” said Ghosh.”The ‘other’ personal loan segment has expanded, that indicates consumers are borrowing against their assets (insurance, PPF, pensions etc). Within the industry segment, credit to iron & steel sector has expanded, but all others have declined. This is a good sign and indicates that the stress in steel sector is perhaps lower than what it was a year back,” said Ghosh.