Private banks lead PSU banks in credit, deposit growth in FY17

Key Highlights: 

• Private banks deposit growth at 20% in FY17
• PSU banks credit growth at 0.8% in FY17
• Private banks credit growth at 17.5% in FY17

Financial year 2016 – 17 (FY17) was challenging for Indian banking system as it dealt with bad loans, demonetisation and single-digit loan growth. 

However, private banks outperformed public sector undertakings (PSU) banks in not only deposit growth but also credit growth.

Latest data of Financial Stability Report show that where private banks deposit growth stood at 20% as on March 2017, PSU Banks deposit growth was at single-digit of 9% for the same period.

In case of credit, private banks growth stood at 17.5% as against PSU banks just 0.8% growth as on March 2017.

Banks' outstanding credit growth  in FY17 reached at Rs 78.81 lakh crore compared Rs 75.01 lakh crore in the corresponding period of the previous. Thus, credit growth stood at 5.08% lowest since 1953-54 when it had inched up by a paltry 1.7%. 

Slowdown in the credit growth in mostly PSU banks has been led by their huge chunk of stressed and bad loans, stagnant corporate investment environment and some migration to the corporate debt market where interest rates were more elastic to policy rate changes.

Care Ratings said that banks are already flush with excess liquidity in term reverse repo on account of lower demand from corporates and unwillingness among banks to lend in light of increasing NPAs. 

As long as this number is high, the supply of credit will be subdued due to both these reasons. This will also affect their income, it said. 

RBI on June 07, 2017, revealed surplus liquidity averaged at Rs 3.8 lakh crore in April 2017 and Rs 3.4 lakh crore in May 2017.

Meanwhile, banks had gross non-performing assets (NPAs) of 9.5% of gross advances valuing up to Rs  7.65 lakh crore. 

GNPAs of a total 21 PSBs stood at Rs 6.19 lakh crore, rising by 19.96% compared to Rs 5.16 lakh crore in the similar period of the previous year.

Recent data of RBI indicates, improvement in banks credit growth. In latest fortnight ending June 9, 2017, bank credit growth recovers to 5.8% on year-on-year basis - highest in past six months. Outstanding credit base increased by Rs 64,700 crore during the fortnight. 

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Nitin Aggarwal and Renish Patel, analysts at Antique Stock Broking Limited said, ''We expect FY18E to end with credit growth of 10% yoy led by continued traction in retail loans even as industrial credit demand remains muted. We note that as per latest print the systemic retail loan growth stands at 15% y-y led by strong traction in Personal loans, Credit card and Vehicle segment while Housing segment has reported slight moderation in growth."

The duo added, ''We believe that banks will remain saddled with surplus liquidity until 1HFY18E which will act as a drag on margins while widening differential between base rate and MCLR will catalyze refinancing activity thus leading to accelerated repricing of lending portfolio.''