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HDFC Securities Report
Non-food credit growth slowed further to 6.7% YoY (versus 6.8% in May). We do not find this surprising, given the disruption to real economic activity resulting in muted credit demand and risk aversion at banks.
This trend has been led by slowing service credit and personal loan growth, even as industrial credit growth accelerated slightly.
Non-food credit growth can slow further, we believe, as Covid-19 continues to impact real economic activity, especially after the moratorium ends.
Industrial credit accelerated slightly to 2.2% YoY, from 1.7% in May, led by an increase in large industrial credit growth from 2.8% YoY to 3.7%.
Service sector credit growth slowed slightly to 10.7% YoY (vs. 11.2% in May). Growth in credit to non banking financial sectors (up 25.7% YoY), tourism, hotels and restaurants (up16.8% YoY) was relatively healthy but trending down.
Personal loans have seen the most dramatic slowdown in growth (relative to pre-Covid-19 levels and those seen in other loan segments). However, YoY growth in this segment slowed just 10 basis points to 10.5% (versus May 2020).
Agriculture credit growth surprisingly slowed further to just 2.2% YoY, from 3.5% YoY in May. We find this surprising, given that the country has seen a good winter harvest and reasonably well distributed monsoon rainfall so far.
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