A decline in loan growth across segments was witnessed in the third quarter due to lenders working through their liability-side challenges and weaker demand for loans from borrowers, Kotak Institutional Equities said.
In public sector, loan growth slowed 11% on-year, while in private sector it slowed 12%. Weakness is noticed across sectors barring mid-sized loans, it said in a note issued on Monday, citing the release of segmental information by the Reserve Bank of India.
The overall loan growth was 12% year-on-year in the December quarter, the brokerage pointed out.
There was a slow down in the large ticket-size loans—Rs 100 crore and above—due to a decline in lending to the non-banking financial companies. Growth in household-sector loans have also come down, Kotak Institutional Equities said.
Private banks and public banks have relatively more granular portfolios than what had been seen in the previous corporate cycle, according to the brokerage. Ticket size, type of loans, sectors, and banks along with state-wise distribution of growth suggest that the book is becoming diversified.
A declining trend from unsecured loans to retail loans has been noticed, it said. The data also suggested that the corporate capital-expenditure cycle-led demand for loans remains weak.
Lenders have tightened their credit filters, especially for unsecured loan segment. It has been the case for awhile now, hence much of the stress have flowed through, according to Kotak Institutional Equities.
The brokerage also said that there's very little evidence to support the argument that asset quality concern is impacting the asset quality stress. In the third quarter, slippage remained largely under control, and the special mention account data by various lenders also shows a similar conclusion, it added.
"We do see stress in products that serve the bottom half of the income pyramid, but it has not extended to segments where banks have a dominant portfolio," the brokerage further said.
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