Synopsis: Lending to the corporate sector decelerated from 36.6% in the year 2014 to 27.7% in March 2021. The process of corporate credit acceleration in government-owned firms was set off by the sharp decline in credit to the private sector partly due to de-leveraging.
During the same period, personal loans grew from 16.2 to 26.3%, which housing loans grew from 8.5% to 13.8%.
The process of corporate continuing to deleverage in their books and scouting cheaper sources of funding has led to a fall in the share of the industrial sector in total credits of banks.
Banks pushing loans in the retail segment, total bank credit to the industrial sector dropped by 14% 2014-2021.
According to the data, total industry credit which was having the lion’s share or major share of banks credit of 42.7 percent at the end of March 2014 fell to 28.7% at the end of FY2021.
The present situation for bank credit is in a bad mode in the midst of the pandemic with credit supply paused by persisting risk and subdued loan demand, as per the report. Over the past few years, the part of the industrial sector in total bank credit has declined when compared to the personal loan which has seen growth.
There is also a huge decline in loans to the private corporate sector which declined from 35.6 percent in 2014 to 27.7 percent at the end of March 2021.
Analysts noted that corporate credit acceleration in government-owned companies has also seen a sharp decline in the credit to the private sector partly due to de-leveraging. In the same period, individual loans saw a growth from 16 percent to 26 percent in which housing loans also saw growth from 8.5 percent to 13.7 percent.
The total credit growth rate for banks saw a decline due to the Covid pandemic and it was 5 percent in financial year 21. To conclude the present 2nd wave of Covid saw a slow move in credit relative to the retail credit system.
According to the data, wholesale corporate borrowers started mobilizing the funds largely through market instruments a year ago. During this pandemic credit to corporate sectors by banks saw a huge decline.
Lower rates available in market instruments made the private corporate sectors get exposure to market instruments rather than the aggregate banking sector.
