Banks taper credit to big business

Tags: News

Shift focus to home, car and personal loans

Banks have clamped down on credit to the telecom, power, iron and steel and petrochemicals sectors while stepping up credit for construction finance, including home loans, vehicles, vehicle parts and transport, services sector and personal loans. The deceleration in the economy and the pileup of bad debt have forced banks to taper credit to the corporate sector.

According to RBI data, bank credit to industry segments, including micro, small, medium and large industries came down to 13.6 per cent by January 24, the latest date for which data is available.

Bank credit to the telecom sector was the worst affected with a degrowth of 5.3 per cent over the previous year, with outstanding loans to the telecom sector at Rs 87,600 crore till January-end. In the year-ago period, the telecom sector saw a year-on-year credit growth of 4.6 per cent.

A senior SBI official said, “There is no demand from industry. In the telecom sector, we have already funded the last round of spectrum auctions and some of our customers, Airtel and Vodafone, still have some credit lines open with us. In the power sector, we are mostly funding the generation companies and not so much the distribution companies. But no new power companies have been set up and that has resulted in deceleration of credit.”

The year-on-year gro­wth to the power sector during this period was 17.7 per cent, with outstanding loans at Rs 24,75,800 crore.

In the year-ago period, bank credit to the power sector grew at 28.8 per cent over the preceding year. Infrastructure as a whole took a hit due to policy paralysis resulting in 13.1 per cent year-on-year growth at Rs 8,16,200 crore. Bank credit to the infrastructure sector in the year-ago period was 19.4 per cent.

Rising non-performing loans to the iron and steel sectors also led to a deceleration in credit flow to the sector. Year-on-year growth at the end of January was 13.8 per cent, lower than the 21.7 per cent registered for the same time last year.

Sonal Varma, economist at Nomura Securities, said in a note, “After a sharp slowdown in 2011-12, credit growth has stabilised at around 15 per cent year-on-year in the last year. However, although the headline number is stable, there are divergences in the growth of credit to industry. Specifically, credit growth to industry has steadily moderated, while loans extended to the services sector and personal loans have risen.”

With the national highway authority of India (NHAI) going slow on clearances, bank finance to the road sector also slid to 17.7 per cent to Rs 1,53,100 crore from 21.8 per cent a year ago.

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