PSU banks improve credit growth in September
Even as the credit growth of banks declined to 5% in September 2020, public sector banks were able to show an improvement in the loan growth from March to September, 2020. Public sector banks registered a 4.6% year-on-year (y-o-y) credit growth in September 2020, compared to 3% loan growth in March 2020, as per financial stability report (FSR) released by Reserve Bank of India (RBI).
Credit growth for private sector banks, however, declined to 7.1% in September 2020, against the 10.4% growth clocked in March 2020.
Foreign banks reported a negative credit growth of 5.4%, as against 7.2% growth in March 2020. Credit growth of banks remained at 5.7% in March 2020.
“Loans disbursed through new accounts declined by almost one-fourth in the first quarter of the current financial year (Q1 FY21) on an annual basis but subsequently, there has been some recovery,” the report said. “In Q2 FY21 growth in new loans was witnessed primarily in the agriculture sector and in the personal loans segment,” the report further said.
The share of large borrowers in the loan portfolios sustained its downward trajectory the central bank’s report showed. While the share of large borrowers in loans came down to 50.5%, they accounted for 73.5% gross non-performing assets (GNPAs) in September 2020. The share of restructured standard advances increased, indicating that large borrowers have commenced availing restructuring benefits extended for Covid-19 stressed borrower, RBI said.
The central bank had earlier allowed restructuring of personal and corporate loans impacted by Covid-19.
RBI highlighted that by contrast, the deposit growth of banks remained robust at 10.3% (y-o-y), driven by precautionary savings. Public sector banks were able to record the highest deposit growth in five years at 9.6%. The deposit growth for private lenders remained 10.4% in September, 2020, without any change from March 2020.
On the earnings front, net interest income (NII) of banks grew at a much higher clip of 16.2% in September 2020, compared to 13% in March 2020. However, growth in other operating income (OOI) plummeted to 1.2% from 29.2% in March 2020.