MUMBAI: Some of India’s private sector lenders have witnessed a tepid rise in loans in the first quarter of FY21 on a sequential basis, with some reporting a decline between the March and the June quarter.
Four private sector lenders -- HDFC Bank, IndusInd Bank, Bandhan Bank and Federal Bank – have, over the last few days, disclosed the quantum of their deposits and advances for the June quarter although the financial results are yet to be announced. Seen as a confidence building measure amid the gloom and doom of the pandemic, the numbers show the extent of difficulty these banks faced during the lockdown to source new loans, although deposits kept flowing in.
To be sure, the first quarter is typically a lean season for loans as credit usually picks up in the latter half of the year but covid-19 has slowed it even further.
At IndusInd Bank, the loan book shrunk 3% sequentially in the June quarter of FY21, according to regulatory filings. The bank’s net advances stood at ₹2 trillion as on 30 June compared with ₹2.06 trillion in March. Growth in loans on a year-on-year (y-o-y) basis was tepid as well at 3.5%.
For India’s largest private sector lender HDFC Bank, loans grew 1% between March and June to ₹10.04 trillion, while deposits rose over 3%. When compared to the June quarter in 2019, the bank witnessed a 21% increase in total advances.
The trend is also reflected in Reserve Bank of India (RBI) data, which shows that outstanding non-food credit has been shrinking since the lockdown. Between 27 March and 19 June, it shrunk 1.6% or by ₹1.64 trillion.
With banks cherry-picking customers during the pandemic, better asset quality and low-risk credit are being prioritised. Experts believe that this has led to a slackening growth in bank loans.
The situation is expected to improve, albeit a bit, from June as banks have started disbursing loans to small businesses after an assurance from the government to guarantee fresh loans of up to 20% of the outstanding.
According to analysts at Kotak Institutional Equities, corporate loan growth continues to be muted and most banks are focused on lending to better rated companies.
"The broader deleveraging theme continues to play out and is further accentuated due to covid-19. Capacity utilisation levels have expectedly seen sharp decline which has further increased uncertainty on any capex revival in the economy," said the Kotak Institutional Equities report on 6 July.
Kolkata-based private sector lender Bandhan Bank witnessed a 3% sequential growth in loans and advances to ₹74,325 crore as on 30 June, while Kerala-based Federal Bank’s total advances declined 0.86% between March and June but rose 8.2% y-o-y to ₹1.23 trillion.
"Banks are choosing their credit portfolios with a higher degree of caution despite decline in interest yields; hence credit growth of banks is expected to remain slower in the near term," Care Ratings said in a report on 6 July.
The situation is similar at consumer durables financier Bajaj Finance. The lender said on 6 July that the number new loans booked in the first three months of FY21 declined 77% year-on-year to 1.7 million. Its total assets under management (AUM) stood at approximately ₹1.38 trillion as on 30 June compared with ₹1.43 trillion as on 30 April.
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