India: Record low credit growth – 1000 companies borrowed INR1tr less in FY17 – 26 Jun 2017

  • The record low bank credit growth of 5.1% in FY17 was led by the top 1,000 listed corporates which saw their net loan outstanding decline by a whopping INR1tr in the reporting year, said a report.
  • One-third of this massive contraction was led by just 10 companies, which cumulatively availed of INR 33,571 crore less compared to FY16, according to the report by SBI Research.
  • According to SBI chief economic adviser Soumya Kanti Ghosh, who penned the report, this could either be perceived as lower debt utilisation levels or prepayment through internal accruals or through asset sale. Other reasons could be QIP or private equity participation.
  • The RBI data showed that bank credit inched up by a tad 5.1% in 1Q17, which was the lowest since 1951 when it had grown by a paltry 1.8% which could be attributed to a rise in bond issuance and cheaper non-bank fund sources coupled with overall credit aversion in the economy as well as non-investment by the private sector in capacity expansion.
  • However, taken as a whole, there was an 8% increase on a CAGR basis in loan funds outstanding over FY15 while many top-notch corporates reported contraction in loan funds outstanding in FY17 over FY16.

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