Aggressive private banks have overtaken public sector banks (PSBs) in the country in terms of number of borrowers and expanded their share in loan outstandings in calendar year 2019.
An RBI report states that private sector banks led the credit expansion with their share in the total credit successively expanding to 35.7 per cent in December 2019, from 32.2 per cent a year ago and 30.0 per cent two years ago. State-owned banks’ share has fallen from 70 per cent to less than 65 per cent now.
According to the Reserve Bank of India (RBI), total credit outstanding of private banks was at Rs 35,34,855 crore as of December 2019, as against Rs 29,67,516 crore in December 2018 — a rise of 19.11 per cent. PSBs reported credit outstanding of Rs 58,49,986 crore, a marginal rise of just 1 per cent when compared to Rs 57,91,822 crore a year ago.
Private lenders reported a big expansion of their borrower base to 12.60 crore in December 2019 from 8.68 crore borrowers a year ago. PSBs just managed to increase their number of borrowers from 9.17 crore to 9.32 crore during the year, according to the RBI report ‘Quarterly BSR-1: Outstanding Credit of Scheduled Commercial Banks for December 2019’.
Private banks also managed to increase their retail borrower base significantly last year. “Private banks have been focusing on the wholesale and retail customers — especially in the personal loan segment which includes auto and home loans. PSU banks started looking at the retail segment only recently. The year 2019 was tough for the banking sector in the wake of the woes in the financial sector and sluggish credit growth,” said a banking source.
The RBI report said bank credit growth on a year-on year basis (y-o-y) decelerated for the fourth successive quarter in December 2019, as industrial credit growth (-0.8 per cent) moved to negative terrain for the first time after September 2017.
However, personal loans segment continued to grow at robust pace (17.1 per cent). The total bank credit of all scheduled commercial banks was at Rs 102,52,405 crore as of April 8, 2020 as against Rs 96,24,756 crore a year ago.
Spreading of loan defaults remains a major concern
The possibility of loan defaults spilling over from the corporate sector to the retail segment, a key growth area for lenders in recent years, has been flagged as a growing concern by bankers. This comes on top of the expected rise in defaults by corporates as well as MSMEs, which are directly impacted by the lockdown.
Meanwhile, credit growth (y-o-y) by metropolitan branches decelerated to 5.2 per cent in December 2019 from 14.7 per cent a year ago, whereas bank branches in rural, semi-urban and urban areas maintained double-digit credit growth.
The central bank said the share of private non-financial companies in total credit declined to 25.8 per cent (28.4 per cent a year ago), whereas for individual borrowers, it increased to 40.3 per cent (37.3 per cent a year ago).
“The share of female borrowers in total loans also increased marginally,” the Reserve Bank report said.
As branches in northern, western and southern states account for nearly 84 per cent of the total credit, bulk of the deposits were also from these regions.
According to the report, weighted average lending rate (WALR) for outstanding credit declined by 15 basis points (bps) during the quarter ended December 2019. “The decline was significant for industry (28 bps) and trade (29 bps) sectors,” it said.
However, deposit rates also declined as part of asset-liability adjustment of banks.
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