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Wednesday, August 05, 2020

Credit offtake falls Rs 1.81 lakh crore in April, May

According to RBI Governor Shaktikanta Das, the liquidity measures announced by the RBI since February 2020 aggregate to about Rs 9.57 lakh crore — equivalent to about 4.7 per cent of 2019-20 nominal GDP.

Written by Sandeep Singh , George Mathew | Mumbai, New Delhi | Published: July 14, 2020 3:00:33 am
Experts say that the contraction in credit is both a result of decline in loan off-take and continuation in principal repayments. (File)

moneyThe non-food credit outstanding in the first two full months of the lockdown — April and May — witnessed a contraction of 2 per cent, or Rs 1.81 lakh crore, since March 2020 despite the big push by the government and the Reserve Bank for liquidity and credit flow in the economy amid the Covid-19 pandemic and its impact on economic activity.

The good news though has been that the pace of contraction in May declined over that in April. While the overall non-food credit outstanding came down from Rs 92.11 lakh crore as on March 27, 2020 to Rs 90.29 lakh crore on May 22, 2020, the contraction in May stood lower at Rs 70,901 crore, from contraction of Rs 110,896 crore in April in the non-food credit segment.

According to RBI Governor Shaktikanta Das, the liquidity measures announced by the RBI since February 2020 aggregate to about Rs 9.57 lakh crore — equivalent to about 4.7 per cent of 2019-20 nominal GDP. The RBI also cut the repo rate by 135 basis points to 4 per cent since February this year, forcing banks to slash interest rates across the board.

Experts say that the contraction in credit is both a result of decline in loan off-take and continuation in principal repayments.

State Bank of India Chairman Rajnish Kumar said borrowers in general are cutting their liabilities and SBI has been seeing loan repayments even from those accounts that were overdue.

A closer look at the data shows that there has been a big recovery in the personal loan (PL) segment in May over April. While there was a sharp contraction of Rs 62,861 crore in credit outstanding to the PL segment in April, it came down to Rs 11,928 crore. The overall credit outstanding in PL segment over the two-month period has been 2.9 per cent. But that does not hold true for industry and services segment, as the two segments saw an increase in contraction in May over April.

It is, however, important to note that in the PL segment, while the housing loan accounts for 54 per cent of the loan outstanding, it saw a very marginal contraction of 0.7 per cent. By comparison, the credit card outstanding and loans against fixed deposits witnessed contraction of 14.1 and 20 per cent, respectively. Credit card outstandings fell by Rs 16,000 crore to Rs 92,887 crore, indicating card holders prepaid the dues in two months.

While fresh home loan demand has been negligible over the last two months, bankers say that the moratorium option may have resulted into less contraction as those who opted for moratorium for 1-6 months would see the interest for the opted period getting added to the principal amount leading to an expansion in credit for the bank.

For the industrial segment, the contraction over two months has been mostly seen in MSME (7.6 per cent) and medium scale industry (5.4 per cent) and the large industrial units (0.4 per cent) have not seen much of contraction.

For the MSME segment, the credit outstanding contracted from Rs 3.81 lakh crore in March to 3.52 lakh crore in May.

This shows that even as the government has been pushing to fund the MSMEs, banks were initially reluctant to lend them a helping hand because of their vulnerability in times of stress.

Outward remittance by resident Indians sees moderate revival in May

New Delhi: Outward remittance by resident Indians witnessed a moderate revival after a sharp decline in April following the lockdown and travel restrictions on account of the pandemic. While the remittance in April fell sharply to $499 million (lowest in four years) from a remittance of $1.36 billion in March 2020, it rose to $617 million in May.

Remittance due to study abroad went up from $78.8 million in April 2020 to $155.8 million in May. Remittance on account of travel, which accounted for $6.9 billion worth of remittance out of the total of $18.76 billion in FY20, went up from $121 million in April to $157 million in May. —ENS

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