Credit offtake falls Rs 1.81 lakh crore in April, May
- The non-food credit outstanding in the first two full months of the lockdown — April and May — witnessed a contraction of 2 percent, or Rs 1.81 lakh crore, since March 2020 despite the big push by the government and the Reserve Bank for liquidity and credit flow in the economy amid the COVID 19 pandemic and its impact on economic activity.
- The good news though has been that the pace of contraction in May declined over that in April. While the overall non-food credit outstanding came down from Rs 92.11 lakh crore as on March 27, 2020, to Rs 90.29 lakh crore on May 22, 2020, the contraction in May stood lower at Rs 70,901 crore, from the contraction of Rs 110,896 crore in April in the non-food credit segment.
- According to RBI Governor Shaktikanta Das, the liquidity measures announced by the RBI since February 2020 aggregate to about Rs 9.57 lakh crore — equivalent to about 4.7 percent of 2019-20 nominal GDP. The RBI also cut the repo rate by 135 basis points to 4 percent since February this year, forcing banks to slash interest rates across the board.
- Experts say that the contraction in credit is both a result of the decline in loan off-take and continuation in principal repayments.
- A closer look at the data shows that there has been a big recovery in the personal loan (PL) segment in May over April. While there was a sharp contraction of Rs 62,861 crore in credit outstanding to the PL segment in April, it came down to Rs 11,928 crore. The overall credit outstanding in PL segment over the two-month period has been 2.9 percent. But that does not hold true for industry and services segment, as the two segments saw an increase in contraction in May over April.
- It is, however, important to note that in the PL segment, while the housing loan accounts for 54 percent of the loan outstanding, it saw a very marginal contraction of 0.7 percent. By comparison, the credit card outstanding and loans against fixed deposits witnessed a contraction of 14.1 and 20 percent, respectively. Credit card outstandings fell by Rs 16,000 crore to Rs 92,887 crore, indicating cardholders prepaid the dues in two months.
- While fresh home loan demand has been negligible over the last two months, bankers say that the moratorium option may have resulted into less contraction as those who opted for a moratorium for 1-6 months would see the interest for the opted period getting added to the principal amount leading to an expansion in credit for the bank.
- For the industrial segment, the contraction over two months has been mostly seen in MSME (7.6 percent) and medium scale industry (5.4 percent), and the large industrial units (0.4 percent) have not seen much of contraction.
- For the MSME segment, the credit outstanding contracted from Rs 3.81 lakh crore in March to 3.52 lakh crore in May.
- This shows that even as the government has been pushing to fund the MSMEs, banks were initially reluctant to lend them a helping hand because of their vulnerability in times of stress.
Source: Indian express