Tag: FY20

HDFC Bank to hire 500 more to expand MSME coverage, BFSI News, ET BFSI

Banking & Finance

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Country’s largest private sector lender HDFC Bank, which has a focus on the MSME sector, is hiring 500 more relationship managers this fiscal as the bank is expanding its coverage to 575 districts, a senior banker has said. The headcount addition will take the bank’s Micro, Small and Medium Enterprises (MSME) vertical strength to 2,500. As of June end, the HDFC Bank’s employee strength stood around 1.23 lakh.

The bank’s MSME vertical covers 545 districts now with dedicated relationship managers and supervisors, which will be expanded to 575 districts or more by the end of this fiscal.

“As we are expanding our MSME footprint to 575 districts from 545 now, we are hiring over 500 more to the 2,000-strong headcount at the MSME vertical this fiscal year. This should take the overall headcount at the vertical to a little over 2,500,” Sumant Rampal, senior executive vice-president for business banking & healthcare finance, told PTI on Monday.

After reclassification and the resultant tagging of wholesaler and retailer loans under the MSME book, the bank closed the MSME book at Rs 2,01,833 crore in March 2021 quarter, marginally up from Rs 2,01,758 crore in December 2020, when it grew by over 30 per cent.

The government recently asked MSMEs to be re/de-classify themselves based on their turnover and get a Udhyam registration certificate.

The bank’s MSME portfolio is spread across sectors like textiles, fabrication, agri-processing, chemicals, consumer goods, hotels & restaurants, auto components, pharma and paper industry, and also include the entire selling chain ranging from wholesalers, retailers, distributors, stockists and supermarkets, Rampal said.

Rampal said the bank has been increasing its focus on the sector since the past two years, and the same only increased since the pandemic when the government opened a slew of measures to help small businesses tide over the crisis with the emergency credit line guarantee scheme (ECLGS) being the biggest booster helping it disburse 30 per cent more loans by December 2020, to Rs 2,01,758 crore.

Rampal said his team has already identified the districts for expansion. Though the bank has regular branches in these identified districts, MSME lending needs special focus based on their unique needs, he said.

He said of the over 5,500 branches, a little over 1,800 of them have more than 25 per cent of their loans coming in MSME accounts and 4,800 of them service this segment of customers.

Geographically speaking, the bank is present in 630 districts of which 545 districts now have special MSME counters.

Giving a break-up of the hiring, he said, of the total 500 planned additions, half will be for the small & medium sub-vertical, which already is a 975-strong team.

Though the RBI last Friday said there was nothing alarming about rise in MSME bad loans, a SIDBI-CIBIL report in late July said, the NPA levels among MSME borrowers surged to 12.6 per cent in the March 2021 quarter, up from 12 per cent in December 2020, while loans to them have jumped to Rs 9.5 lakh crore in FY21 from Rs 6.8 lakh crore in FY20.



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Banks tank up on capital but corporate loan demand is missing, BFSI News, ET BFSI

Banking & Finance

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Bank credit growth to the industrial sector decelerated 0.8% year-to-date as of May 21, 2021, due to poor loan offtake from the corporate sector.

It slowed the non-food credit growth to 5.9 per cent in May 2021, as compared to 6.1 per cent in the year-ago month, RBI data showed.

On the other hand, personal loans registered an accelerated growth of 12.4 per cent in May 2021, as compared to 10.6 per cent a year ago, primarily due to accelerated growth in vehicle loans and credit card outstanding.

What’s up?

Corporates are preferring to deleverage debt and waiting it out for the pandemic to end before committing any new capital expenditure. They are retiring high-cost bank loans by tapping the bond markets where funds are available for cheaper rates.

Banks anticipate a loan demand surge from retail as the pandemic ebbs in the year ahead. However, the corporate loan demand is not yet on horizon.

Loans to industry

Loans to industries were 1.7% higher on year as of May 22, 2020, according to data on sectoral deployment of bank loans in May released by the Reserve Bank of India.

The RBI said that the fall in loans extended to industries was mainly because credit to large industries contracted by 1.7% compared to a growth of 2.8% a year ago.

However, credit to medium industries registered a robust growth of 45.8% compared to 5.3% in the previous year, and those to micro and small industries registered a growth of 5.0% versus a contraction of 3.4%.

Within the industrial sector, mining and quarrying, food processing, textiles, gems and jewellery, wood and wood products, paper and paper products, glass and glassware, infrastructure, leather and leather products, rubber, as well as plastic and plastic products registered higher growth in May.

On the other hand, credit to beverages and tobacco, petroleum coal products and nuclear fuels, vehicles, vehicle parts and transport equipment, basic metal and metal products, cement and cement products, all engineering, chemicals and chemical products and construction decelerated, RBI said in a release.

Fiscal 2021

Growth in credit to the private corporate sector, however, declined for the sixth successive quarter in the fourth quarter of the last fiscal and its share in total credit stood at 28.3 per cent. RBI said the weighted average lending rate (WALR) on outstanding credit has moderated by 91 basis points during 2020-21, including a decline of 21 basis points in Q4.

Overall credit growth in India slowed down in FY21 to 5.6 per cent from 6.4 per cent in FY20 as the economy was hit hard by Covid. and subsequent lockdowns.

Credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. Industrial loan growth, on the other hand, remained negative during all quarters of 2020-21.”

The RBI further said working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, indicating the impact of the coronavirus pandemic.

Shift to bonds

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

Corporates raised Rs 2.1 lakh crore in December ended quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.



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Personal loans keep banks afloat in FY21 as industrial credit demand sinks, BFSI News, ET BFSI

Banking & Finance

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Credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns, RBI data showed on Tuesday. However, “personal loans continued to grow at a robust pace and recorded 13.5 per cent growth (Y-oY) in March 2021; industrial loan growth, on the other hand, remained negative during all quarters of 2020-21.”

The RBI further said working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, indicating the impact of the coronavirus pandemic.

Private banks

The data further revealed that private sector banks recorded higher loan growth when compared to public sector lenders. Their share in total credit increased to 36.5 per cent in March 2021 from 35.4 per cent a year ago and 24.8 per cent five years ago, it said.

However, the private sector banks’ loan growth slowed to 9.1 per cent in FY21, from 9.3 per cent in FY20. Public sector loans grew 3.6 per cent in FY21, down from 4.2 per cent in FY20. The lending by foreign banks shrunk by 3.3 per cent during 2020-21 as against a growth of 7.2 per cent a year ago.

Credit to the household sector rose by 10.9 per cent (Y-o-Y) and its share in total credit increased to 52.6 per cent in March 2021 from 49.8 per cent a year ago, as per the ‘Quarterly Basic Statistical Returns (BSR)-1: Outstanding Credit of Scheduled Commercial Banks (SCBs), March 2021’, released by the central bank.

Industrial credit

Growth in credit to the private corporate sector, however, declined for the sixth successive quarter and its share in total credit stood at 28.3 per cent. RBI said the weighted average lending rate (WALR) on outstanding credit has moderated by 91 basis points during 2020-21, including a decline of 21 basis points in Q4.

It also said bank branches in urban, semi-urban and rural areas recorded double-digit credit growth (Y-o-Y) in March 2021, whereas metropolitan branches, which accounted for 63 per cent of bank credit, logged 1.4 per cent growth.

Overall credit growth in India slowed down in FY21 to 5.6 per cent from 6.4 per cent in FY20 as the economy was hit hard by Covid. and subsequent lockdowns.



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