Bank credit growth falls to 14.8% in July from 18.7% in June
The latest credit data from July raises some interesting points, especially when it comes to the impact of the HDFC merger and its implications for various sectors of the economy.
The Reserve Bank of India (RBI) plays a pivotal role in regulating the country's financial sector, and one of its essential functions is to release credit data on a monthly basis. These reports offer insights into the nation's economic health, helping analysts and policymakers gauge the overall credit growth in India.
However, the latest credit data from July raises some interesting points, especially when it comes to the impact of the HDFC merger and its implications for various sectors of the economy.
(Note: In the July credit data, an asterisk on the table is a sign that the HDFC growth is not being counted. This adjustment has a significant impact on the numbers, making July's credit growth appear exceptionally robust.)
When HDFC is excluded from the calculation, the overall loan and food credit growth stands at 14.8 percent. This figure, although healthy, is notably slower than the June number of 18.7 percent.
The credit growth data reveals intriguing insights into various sectors.
Agriculture:
In July, agriculture recorded a credit growth of only 16.8 percent, compared to the previous month's 19.7 percent. These figures, reported year on year (YoY), indicate a slight decline in credit expansion.
Corporate Sector: The corporate sector experienced a 14.5 percent increase in loans in July. However, this is a decrease from the 17.7 percent growth seen in June, indicating a potential slowdown.
MSMEs: Micro, Small, and Medium Enterprises (MSMEs) reported a credit growth of 14.1 percent in July, which, while a positive figure, is lower than the growth observed in June.
Housing: When adjusted for HDFC, housing credit growth soars to an impressive 38 percent. However, without HDFC, banks have only extended credit by 13.1 percent, reflecting a substantial difference in the numbers.
Auto: The auto sector showed a credit growth of 21.2 percent in July, a commendable figure but still lower than the growth observed in June.
Credit Cards: Credit card growth in July stood at 31 percent, a strong performance but lower than the 36 percent growth seen in June.
HSBC, one of the leading financial institutions, offers an interesting perspective on the credit growth data. According to HSBC's analysis, when the HDFC merger is taken into account, credit growth is a robust 20 percent, which is certainly positive news. However, they highlight that across the board, SMEs, the corporate sector, and the retail sector have all experienced slower growth.
HSBC's view is that this could be a short-term phenomenon and may not persist in subsequent quarters. They have maintained their year-end credit growth target of 13 percent for banks and 19 percent for the overall credit system, which includes wholesale and NBFCs. This suggests that they are not overly concerned about the temporary dip in credit growth.
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