Chennai: Industrial credit slowed across sub-sectors in November, with loans to micro, small and medium enterprises reporting the biggest fall. Credit growth to the services sector slowed down on a month-on-month (m-o-m) basis but performed relatively better than industries.

Credit to small & micro enterprises fell by 7.7% y-o-y to around Rs 3.44 lakh crore and to medium enterprises by 10% y-o-y to Rs 1.03 lakh crore, down for the tenth straight month, restricting growth in industry sector credit. Credit to industries fell 3.4% year-on-year (y-o-y) to Rs 25.79 lakh crore for November compared to a 1.7% drop in October.

Credit to large industries, which have about 33% share in non-food credit, was down by 2.3% on a y-o-y basis to around Rs 21.33 lakh crore. A slowdown was observed across sub-sectors such as food processing (13.4% fall compared to 1.3% decline in November 2015), engineering (down 5% compared to 8.9% growth) and chemicals & chemical products (2.1% drop compared to 1.5% increase).

Retail and agriculture were the only bright spots in credit off-take. Retail credit jumped 15.2% y-o-y to around Rs 1.5 lakh crore at the end of November while credit to agriculture increased 10.3% y-o-y to about Rs 91,000 crore.

Personal loans grew by 15% in November compared to the 17% jump seen in October. Excluding retail credit, the overall non-food credit growth was subdued at 2% and is steadily trending down even without accounting for the impact of demonetisation.

Housing loans grew by 15.6%, down 1% from the previous month. However, sub-segments such as consumer durables loans (18% y-o-y increase), credit card loans (23% jump) and vehicle loans (21% increase) continued to grow at a good clip. Infrastructure loans declined by 6.7% y-o-y as telecom/power sector loans fell by 6.3% and 10.4% respectively. Non-infrastructure segments saw a tepid 1.4% y-o-y increase in credit growth.

“We believe the ill effects of demonetisation on consumer durables, vehicle and home loans will be felt in Q4FY17 (fourth quarter of 2016-17), which is likely to put pressure on overall credit (growth),” analysts at Religare Capital Markets said.

Credit growth to the services sector decelerated to 7.1% in November from 9.3% in October. A bulk of the decline was in sub-sectors such as NBFCs (non-banking finance companies), transport operators, commercial real estate and other services.

Source: Times of India