Wave 2 marks nascent recovery in lending growth – The New Indian Express


Express news service

NEW DELHI: The first updates for the June quarter by at least five banks gave credence to the recent remark by members of the Reserve Bank of India’s monetary policy committee that “the biggest balance sheet of the second wave is in terms of demand shock ”.

India’s most valuable lender HDFC Bank on Monday said it saw a 30.24% quarter-on-quarter contraction in retail disbursements in the June quarter, mainly due to the negative impact of the second wave, resulting in the contraction of outstanding loans to individuals. 1% sequentially.

For Yes Bank, retail disbursements during the quarter under review fell 34.86% compared to the quarter ended in March. The breach is much deeper for Yes Bank as it saw a decline in the overall loan portfolio even from last year’s low base which was hit hard by a tighter foreclosure. Others, including the Federal Bank and CSB Bank, also saw their loan portfolios contract by 1.56% and 3.52% respectively on a sequential basis. IndusInd Bank saw its net advances fall by 1% in the first quarter of fiscal 22.

When the first wave of the pandemic subsided, the economy recovered quickly and in large part due to pent-up demand and higher consumption discretionary.

In fact, demand increased so much that India recorded GDP growth after just two quarters of contraction – an impressive feat for a country that had been stranded for months. Credit demand showed signs of recovery during the fourth quarter of 2020-2021, particularly with regard to the share of new loans in total loans.

Agriculture and personal loan portfolios remained positive points with double-digit growth. However, as the second wave devastated family budgets, many were forced to divert their money to rising health care costs. In addition, higher inflation across categories, soaring retail fuel prices coupled with weak sentiments and lower incomes have resulted in a slowdown in consumption that overshadows the base effect.

The impact of the devastating new wave, which is clearly visible in the provisional loan growth figures revealed by the banks, is however expected to remain limited in the June quarter.

In a regulatory filing, HDFC Bank said its aggregate advance growth stood at Rs 11.47 lakh crore at the end of the June 2021 quarter, up nearly 14.4% from the same quarter. of the previous year. Overall loan growth increased a modest 1.3% from a solid base in the March quarter. Retail disbursements in the quarter suffered as they amounted to Rs 43,600 crore, lower than Rs. 62,500 crore disbursed in the previous quarter, mainly due to the negative impact of the second wave. However, it has seen an expansion from the June quarter of FY21.

Apart from that, business loans also saw moderate growth of 1.5% quarter over quarter, while commercial and rural bank lending increased 4%.

The impact on retail lending comes even as the bank struggles to break out of the RBI’s ban on disbursing new cards. But this is unlikely to have had a significant impact on the lender, as the majority of business comes from existing clients. With consistent double-digit growth in overall advances from last year’s low base, the second-largest private sector lender was able to weather wave two better than its smaller peers.

For example, Federal Bank saw 8% year-on-year growth in the June quarter, while IndusInd Bank saw 7% growth in net advances. Thrissur-based CSB Bank, meanwhile, recorded a 24% increase in lending growth compared to last year. Its advances against gold were Rs. 6,121.27 crore in the first quarter of fiscal 22, an increase of 46.2%.

For Yes Bank, however, even this optical improvement was no relief. The private lender reported a 0.4% year-on-year contraction of its overall loan portfolio to Rs. 1.64 lakh crore, while the loan portfolio sequentially saw a decline of 1.8% over the course of a seasonally weak June quarter compared to Rs. 1.66 lakh crore of the previous quarter. In addition, the bank disbursed Rs. 5,099 crore in retail loans in the June quarter compared to Rs. 7,828 crore in the March quarter.

“For the banking sector, the incremental growth of credit during the period from April to June of FY22 stood at -0.4% against -0.8% for FY21 and 0.1% for the FY20. This indicates that gradual growth has been better than last year but has not yet returned to normal, ”Care Ratings analysts wrote in a recent memo. Going forward, credit growth for fiscal 22 is expected to remain weak in double digits.

But, subdued economic activity and the threat of a third wave could further delay the expected recovery in credit growth despite the availability of abundant liquidity in the banking system and falling interest rates. It was not only borrowers who remained risk averse and unwilling to take on debt, but banks were also selective in granting new loans due to asset quality issues.

“In recent years, the share of the industrial sector in total bank lending has declined while that of personal loans has increased,” the central bank said in its latest Financial Stability Report (FSR), highlighting banks guard against the risks associated with retail lending in a context of economic downturn. and negative consumer sentiment.


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