According to preliminary data from banks, private lenders reported a sequential improvement in net advances in December. While the largest private lender HDFC bank posted 3% growth in its loan book, IndusInd Bank and IDFC First Bank saw advances grow over 3% quarter over quarter. Similarly, Yes Bank saw net advances increase 1.3% for the quarter compared to the September quarter.
An analyst with Emkay Global Financial Services said banks reported Qoq credit growth, largely driven by a festive pickup at the start of economic development. Many lenders reported an improvement in retail lending during the quarter. IDFC First reported an 11.3% increase in retail credit for the quarter compared to the previous quarter. Similarly, Yes Bank’s gross retail disbursements more than doubled in the December quarter to Rs 7,563 crore (qoq), showing a sign of improvement after the rebuilding.
However, in a statement to its clients, Kotak Institutional Equities said the recovery in bank credit growth will be slower than expected. “As credit demand, along with approval rates and new-to-credit (NTC) origination rates, recovers from post-lockdown lows, we expect credit growth to recover more slowly than market participants anticipated,” said Kotak Institutional Equities.
Private lenders also saw strong deposit growth in the December quarter. While the HDFC Bank recorded a deposit growth of 19% compared to the previous year in the December quarter, the IndusInd Bank recorded a deposit growth of 10.56% compared to the previous year. Similarly, the Bundesbank recorded year-on-year growth in the number of deposits of 12%. While HDFC Bank saw deposits grow 3%, IDFC First Bank saw their deposits grow 11% in the December quarter. Similarly, Yes Bank and IndusInd Bank posted deposit growth of 7.7% and 5% for the December quarter, compared to the September quarter.
Lalitabh Srivastava, Deputy Vice President (AVP), Research, Sharekhan, said the proportion of low-cost deposits from private banks is increasing, according to preliminary data. “Maybe they are gaining market share, either from public sector banks or from credit unions. Earning deposit was the next target for private banks as they are already doing better on the prepayment side, ”he added.
Shailendra Kumar, Chief Investment Officer of Narnolia Financial Advisors, said that while the preliminary numbers released by the private lenders were in line with expectations, it will be important to know what is going on in the moratorium accounts and the final restructuring numbers.
Kotak Institutional Equities also said the quality of key assets is likely to deteriorate if the Supreme Court lifts its order banning banks from labeling defaulted loans as non-performing assets (NPAs). From our point of view, the slip could be significantly high, it said. The Apex court had previously instructed the banks to recognize new NPAs only after further orders in the interest rate case. During the moratorium between March and August 2020, a public interest litigation (PIL) was already filed with the Supreme Court to waive interest on interest for borrowers.
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