Reflecting rising festival-like demand, the sanctions by non-banking finance companies rose 17 per cent in the second quarter (Q2FY22) on a year-on-year basis. The personal loan segment saw strong traction of 90 per cent, followed by consumer loan at 58 per cent, according to CRIF-FIDC.
While rural loan sanction has improved even compared to FY 19-20, urban demand for loans is still very muted. The sanctions for term loan and business loans both of which finance capital expenditure continued to shrink, showing deep effects of disruptions caused by pandemic.
Mahesh Thakkar, director general, Finance Industry Development Council (FIDC) said YOY growth in sanctions is 17 per cent. While this is encouraging, it should be seen in light of a very low base of Q2FY21. “If we compare the sanctions in Q2FY22 with the last “normal” year of FY 19-20, we are still witnessing a nine per cent de-growth”, Thakkar said.
The sanctions in absolute terms stood at Rs 2.17 trillion in July-September 2021, higher than Rs 1.85 trillion in Q2FY2 and Rs 1.52 trillion in April-June 2021 period. Yet, the scale was below pre-pandemic period (July-September 2019- Q2FY20) when sanctions were about Rs 2.4 trillion.
Smart recovery was seen in auto, CV, consumer and home loans. However, vis-à-vis FY20, we are still at lower volumes in all these categories except home loans.
Gold and personal loans have shown good recovery but the loan against shares has shown contraction. The RBI guideline on IPO finance should further restrict LAS growth in the next quarter, Thakkar said.
While consumption oriented loans (aforesaid categories) have grown, “Productive usage” loans such as secured business loans, equipment loans and medium/long term loans have shown de-growth.
The sanctions in term loans (above three years) were down 77 per cent to Rs 3,660 crore from Rs 16,038 crore a year ago and 81 per cent below from Rs 19,587 crore in Q2FY21. The secured business loan sanctions shrunk by 17 per cent to Rs 834 crore in Q2FY22 from Rs 1,000 crore in Q2FY21 and down by 26 per cent from Rs 1,128 crore in Q2FY20.
It signifies that the Capital expenditure cycle is still in the negative growth territory. This is not very encouraging as it indicates that the corporate and SME sectors are not yet confident about investing for future growth, he added.