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Credit to NBFCs rises in April, retail credit plunges: Report
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SME Times News Bureau | 01 Jun, 2020
Amidst the nationwide lockdown, banks' credit to non-banking finance
companies (NBFC) increased by Rs 5,000 crore in April 2020, according to
an SBI report.
Among the services, credit to NBFCs, transport
operators and retail traders increased in April. Credit to retail
traders increased by Rs 6,900 crore and that to transport operators rose
by Rs 4,300 crore, said the SBI Ecowrap report.
"YoY credit
growth to industry declined to 1.7 per cent (6.9 per cent last year),
services to 11.2 per cent (16.8) but on YTD basis credit growth to
industry has increased. Within services, there has been an increase in
credit to NBFCs, transport operators, retail traders," it said.
Generally,
agriculture sector credit demand increases in May and June before
sowing season and banks are now disbursing to all the eligible farmers
and also issuing Kisan Credit Cards to all the farmers to meet their
credit requirements timely, it said.
"The important thing is that
the decline in retail credit was the largest since January 2008, from
when the data series is available," it said.
Though credit to all
major industries declined, credit to infrastructure like power, iron
and steel, petrochemicals and petroleum, coal products and nuclear fuels
increased by Rs 23,900 crore in April 2020.
The report authored
by Soumya Kanti Ghosh, Group Chief Economic Adviser of State Bank of
India, said that going forward, the decline in credit to the retail
sector may continue with extension of lockdown in states.
Banks are also leveraging digital platforms to meet the credit requirement in the retail sector.
For
corporates, they will require more enhancement of working capital loans
as well as term loans over the medium term until the growth environment
stabilizes, it said.
The report also said that deposits in all
forms, savings, current and term, increased significantly during
Lockdown-1 as people were apprehensive in the beginning of spending and
turned frugal. During Lockdown-2, there was a 25 per cent decline in
such bank deposits, but term deposit accrual was very healthy.
"The
increase in deposits is also attributable to government spending
picking up pace with the hike in WMA (Ways and Means Advance) limits,"
it said.
The situation became critical during Lockdown-3 when
such deposit growth turned significantly negative, indicating people may
have used the initial build up to start spending as they realised that
lockdown could be a recurring phenomenon. However, the depletion was
only 12 per cent of the deposit build-up in Lockdown-1 and Lockdown-2,
indicating significant risk aversion in consumer spending.
In
Lockdown 4, there has been an increase in deposits again, indicating
consumers are uncertain about spending and instead are saving much more
in bank deposits.
It is also possible that many households may
have marginal propensity to consumption closer to zero because many
types of spending are less available due to social distancing, it said.
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