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Rising interest rates and increased input costs appear to be taking a toll on credit demand from the infrastructure sector.
As per the Reserve Bank of India's latest data on sectoral deployment of credit, aggregate bank credit to the infrastructure sector has grown at a slower clip at 23.4 per cent on a year-on-year basis in July 2011, against 49.4 per cent in July 2010.
Bank credit to the infrastructure sector — power, telecommunications, roads, and so on — increased by Rs 1,04,199 crore in the July 30, 2010 to July 29, 2011 period, against Rs 1,47,304 crore in the July 31, 2009 to July 30, 2010 period.
Negative growth
Within the infrastructure space, the telecommunications segment saw the steepest decline in credit.
Credit to this segment on a y-o-y basis saw a negative growth of 0.8 per cent in July 2011, against a jump of 92.6 per cent in the previous year. Bank credit to the telecommunications segment declined Rs 687 crore in the July 30, 2010 to July 29, 2011 period, against a increase of Rs 43,963 crore in the July 31, 2009 to July 30, 2010 period.
Further, credit to the power segment grew at a slower pace at 34.5 per cent on a year-on-year basis in July 2011, against 49.7 per cent in July 2010.
Bank credit to the power segment increased by Rs 74,537 crore in the July 30, 2010 to July 29, 2011 period, against an increase of Rs 71,749 crore in the July 31, 2009 to July 30, 2010 period.
Notwithstanding the withdrawal of priority sector status to banks loans to non-banking finance companies, credit growth to NBFCs at 55.6 per cent on a y-o-y basis in July 2011 was significantly higher than that of 10.9 per cent during the corresponding period of the previous year.
Apparently, banks are lending to NBFCs due to the lure of higher yield on advances.
Credit to commercial real estate (CRE) sector increased by 17.1 per cent (y-o-y) in July 2011 as compared with 2.4 per cent during the previous year.
Personal loans increased by 15.4 per cent (y-o-y) in July 2011, significantly up from the growth of 8 per cent during the corresponding period of the previous year.
Most of the components of personal loans such as housing, advances against fixed deposits, advances to individuals against shares, bonds, etc., and vehicle loans registered accelerated growth.
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