Banks: Sector Credit Trends - Personal loans lead the way once again - HDFC Securities

Mr Krishnan ASV, Institutional Research Analyst, HDFC Securities

Non-food credit growth inched up marginally to 5.7% YoY in Apr'21 (5.5% in Mar'21), primarily as improvement in personal loan growth partially offset sluggish growth in services. Credit to Industry reverted to sequential de-growth (0.7% MoM), as large industries segment continued to de-grow (1.9% YoY). We continue to believe that while credit growth will bounce back in the near-term from the short-term "second wave" disruption, a sustained recovery in loan growth appears elusive until the Capex cycle revives.

Industrial credit growth was muted (0.4% YoY in Apr'21) post the run-up in March as large industrial credit, constituting ~82% of industrial credit, de-grew 1.9% YoY given the absence of a strong Capex cycle. Growth in credit to medium industries continued to surge, reaching an all-time high of 43.8% YoY, aided by disbursals under the ECLGS. However, credit to micro and small industries was benign at 3.8% YoY. Within industrial credit, credit for roads (~22% of infra credit) clocked healthy growth at 26.2% YoY. Segments such as metals, engineering, chemicals, telecom and construction witnessed persistent YoY de-growth.

Service sector credit growth continued to decelerate, clocking 1.2% YoY (-1.5% MoM) in Apr'21. Within this segment, growth in credit to NBFCs decreased to 3.4% YoY while growth in credit for 'other services' de-grew 11.1% YoY. However, overall trade credit growth grew 10.5% YoY (11.8% in March). Growth in trade credit (wholesale and retail), amongst the very few segments unaffected by the pandemic, improved to 21.9% YoY.

The personal loan segment witnessed further improvement in growth at 12.6% YoY (the highest level since the first wave of the pandemic in Mar'20), after hitting a 10-year low of 9.1% YoY in January. This was led by growth in home loans (+9.5% YoY) and other personal loans (+21.0% YoY). Growth in credit card receivables improved to 17.1% YoY. Vehicle loan growth reached a 32-month high of 11.7% YoY. We opine that the personal loan segment is likely to continue exhibiting high elasticity to bounce back from the "second wave" disruption.

Growth in agricultural credit continued to accelerate, clocking in at 11.3% YoY (12.3% YoY in Mar), boosted by back-to-back surplus monsoon seasons.

Source : Equity Bulls

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