BackMarket round-up | Bank credit continues to weaken in January
In other news, deposit deluge from rural India; digital influence on car buying grows
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The effects of demonetisation continued on bank loan growth, with disbursals to industry falling sharply in January. Non-food credit growth fell to 3.5% with loans to manufacturing companies contracting by 5.1% in January, shows data from the Reserve Bank of India. Loans to medium enterprises bore the brunt, with disbursals to them contracting by a massive 10.2% from the year-ago period. Loans to these firms have been contracting for more than a year now, largely due to piling up of bad loans. Credit disbursals to services held up, while retail loan growth slowed to 12.9%. Notwithstanding the cash purge, consumer durables, credit card outstanding, housing loans and auto loans continued to grow at a fast pace.
Deposit deluge from rural India
Cash-intensive rural India contributed the maximum to the rise in bank deposits in the wake of demonetization, shows data from the Reserve Bank of India. Although rural areas have traditionally been the biggest contributor to the deposit base of banks, the surge during the third quarter that witnessed demonetization was massive. Rural deposits surged 33.4%, the highest growth in six years. Deposits from semi-urban regions grew by 28.7%. The withdrawal of high-value banknotes pushed Indians to deposit their cash hoard with banks and as a result, bank deposit growth has hit multi-year highs. State Bank of India (SBI) and its associates took the lion’s share in deposits and given their extensive network, deposit growth for the SBI group was 21.6%, while that of other nationalized banks was 11.6%. Foreign banks saw their deposits contract.
Digital influence on car buying grows
Digital content is influencing car buyers to a great extent, thus contributing to overall car sales, according to a study by the Boston Consulting Group (BCG). Traffic on auto portals has jumped 51% over the last four years as Indians researched on vehicle models, loan deals and discounts online before deciding on a car to buy. The influence of digital channels has risen exponentially, although actual purchases are still largely offline. Only 23% of buyers strike a deal online and BCG projects that share of digital buyers would grow to 35-40% by 2020. The study by BCG shows that mobile phone usage is the reason behind this increased online activity of customers.
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