BackMark to Market | Bank credit to infrastructure picks up
Infrastructure loans grew 3.9% in the September quarter versus 2.2% a year ago
Premium(Ramesh Pathania/Mint)
While the overall bank credit data points to a slowdown, granular numbers suggest the bottom might have been reached in some sectors. In the second quarter of this fiscal, non-food credit growth was flat, compared with 2.4% in June-September 2011. The slowdown is widespread and cuts across all sectors, but some have held up, rather unexpectedly.
Credit growth to industry has slowed to 0.3% in the September quarter, compared with 4.5% in the year-ago period. Larger firms are doing much better. While micro, small and medium industry has actually seen credit outstanding in the second quarter shrink, large industry has seen credit grow by 0.8%.
What’s really interesting in this set of data is that loans to infrastructure firms are showing some signs of traction. Indeed, infrastructure, construction and cement are three of the five categories within industry (the others being textiles and chemicals) that saw an increase in the pace of loan growth. While loans to cement firms grew 7.8% during the quarter, compared with 6.9% a year ago, infrastructure loans grew 3.9% versus 2.2% a year ago. Within infrastructure, loans to the power sector grew at a startling 10.7%, compared with 2.9% a year ago.
To be sure, loan growth in the first quarter was tepid and it could be one reason for this spurt in growth. Second, capacity addition in the power sector has also been picking up momentum. However, given the problems in the sector, it is more likely that firms’ working capital needs are being stretched.
Loans to the service sector shrank 2.1% in the quarter ended September, compared with 0.2% growth in the year-ago period. The only industry within this category that has shown any growth is shipping. Loans here grew 7.2%, compared with a 2.1% slip a year ago—somewhat puzzling since the industry hasn’t been doing all that well.
Then again, personal loans have increased at a decent pace, even if that is a comedown from the year-ago period. Overall personal loans grew 2.4% from June to September, driven mainly by an increase in credit cards. Credit card outstanding loans grew 7.3% in these three months, compared with 4.3% over a year ago. The impact of the festival season could also be seen slightly. Loans for financing vehicle purchases grew 3.8% over this period, compared with 2% last year. It suggests there might well be a pick up in this sector in the December quarter.
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