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Indian banks are expected to have steady growth in earnings and returns over the next 3–4 years, according to a recent report by Jefferies. It expects a 13% compound annual growth rate (CAGR) in loan growth for banks between FY24 and FY27, helmed by a supportive environment and expected adjustments in interest rates. "We expect steady growth in earnings and stable returns, Over FY24-27, the banks we cover should see 13% CAGRin loans We factor 25-50 bps cut in rates, &amp; depending on timing, NIMs will move," the report said. Depending on the timing, these rate cuts could impact banks' <keyword id="20076541" type="General" weightage="20" keywordseo="net-interest-margins" source="keywords">net interest margins</keyword> (NIMs), which measure the difference between interest income generated and interest paid to depositors. The report also notes that banks' net interest income (NII), a critical metric that is reflective of how much a bank earns from its lending, could grow at a steady 12% CAGR, which would support overall earnings growth. <h2>Rate cuts probable next year</h2>Per SBI Mutual Fund's monthly outlook for November 2024, while markets were initially speculating possible rate reductions in December this year or February next year these chances now stand dampened due to two reasons. First, elevated CPI numbers in September, which stood at a nine-month high, underlined the stickiness of food inflation. Secondly, RBI governor Das recently highlighted his hawkish stance at a conference, stating that "rate cuts at this stage would be premature and risky’. The report further adds that February 2025, or even April, would be a better time to discuss repo rate cuts in India. Even <keyword id="19985925" type="General" weightage="20" keywordseo="bank-credit-growth" source="keywords">bank credit growth</keyword> has continued to outpace deposit growth for two years now. However, they seem to be inching closer in the recent past. For instance, in October 2024, while bank credit growth remained at 12.7%, the deposit growth rate followed closely at 11.8%. This also means that banks are witnessing an elevated bank credit-to-deposit ratio, standing at 77% in October. <h2>Risks in unsecured lending </h2>However, Jefferies noted some areas of caution that could influence growth in other revenue streams, particularly fees. Growth in fees may be at risk due to expected declines in the disbursal of unsecured loans, which generally carry higher interest rates and generate higher fees for banks. October saw stress and defaults rising in the unsecured lending space, prompting the RBI to intervene. As a result, unsecured loans by banks have only grown by 12.1%, the lowest since the pandemic. Despite these risks, the report expects banks' return on assets (ROA) and return on equity (ROE) to remain healthy, underscoring the sector's stable profitability potential. The report also highlights that while the Nifty Banks index has risen by 19% over the past year, it has still underperformed the broader Nifty index, which delivered 27% returns in the same period. BSE Bankex has been along similar lines, generating returns worth 19% over one year. While the Nifty banks' index has a YTD (yield to date) of 7.63%, it continues to trail Nifty's YTD of 11.30%

Indian banks to have steady growth in earning over next 3-4 years, fees from unsecured lending may dip, notes Jefferies report

Amid questions on the depleting <keyword id="20776807" type="General" weightage="100" keywordseo="loan-to-deposit-ratio" source="keywords">loan-to-deposit ratio</keyword> in <keyword id="19895091" type="General" weightage="20" keywordseo="Indian-banks" source="keywords">Indian banks</keyword>, a recent report by <keyword id="19896146" type="General" weightage="20" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="269" meta.entityid="Motilal Oswal">Motilal Oswal</keyword> suggests that the loan-to-deposit (LD) ratio is likely to subside on its own in the coming months. The debate on loan-to-deposit ratio (LD), particularly concerning sluggish <keyword id="19998084" type="General" weightage="20" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> and potential risks to <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">financial stability</keyword> is raised by even the finance minister and the <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-governor" source="keywords">RBI governor</keyword>. However, the report notes that on closer examination, the situation may not be as alarming as it seems. As of 9th August, 2024 the Indian <keyword id="19964544" type="General" weightage="20" keywordseo="banking-sector" source="keywords">banking sector</keyword>'s loan-to-deposit (LD) ratio stood at 77.2 %, which is slightly below its recent peak of 78.2 % on 22nd March 2024, and its all-time high of 78.8 % in September 2013. The report stated that typically a rising LD ratio is indicative of a tightness in the banking sector, potentially indicating overheating. A lower LD indicates that the bank is aggressive in its credit disbursement practises, which could be risky. It highlighted that an analysis of the sector's transactions with the Reserve Bank of India (RBI) through the liquidity adjustment facility (LAF), along with recent trends in the weighted average call rate (WACR), suggests that the current rise in the LD ratio does not indicate tightness, which is why there is no immediate cause of concern. In fact, the report added that the concern over weak deposit growth may be overstated. Historical data show that bank deposits grew at an average rate of 9.5 % during the pre-COVID period (January 2015 to February 2020) and 10.4 % in the post-COVID period (March 2020 to August 2024). Earlier, Finance Minister Nirmala Sitharaman also urged state-run banks to enhance deposit mobilization through attractive offers and focusing on Tier-2 and Tier-3 cities. Loan-to-deposit ratio pegs the total deposits received by the bank against the loans it has offered. It helps in understanding how liquid the bank is. The loan-to-deposit ratio (LDR) is a financial metric that compares a bank's total loans to its total deposits. It's used to assess a bank's liquidity and credit risk, and to inform lending and deposit-taking decisions The report said while the exact measures are unclear, the deposit growth could potentially be increased by making other asset classes less attractive through taxation or interest rates, or by boosting fiscal spending to increase net credit to the government. In its forecast, the report noted that private banks will witness a moderation in their <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>, while public sector banks will maintain a healthy credit growth rate. "Our analysis suggests that deposit growth could be raised by either making other asset classes unattractive (through taxation and/or interest rate) or increasing the growth in net credit to the government by pushing fiscal spending higher" the report added. Alternatively, policymakers might consider curtailing loan growth to lower the LD ratio. However, this could slow deposit growth, particularly if corporate credit growth remains weak. Encouraging savers to shift investments from other assets to bank deposits could also be an option, but this carries risks of overreach and potential damage to economic confidence. Das had also flagged the excessive growth, or froth developing in the personal loan space. Notably, while credit growth in unsecured personal loans like credit cards continues to decline, it remains elevated at 23.3% as of June 2024. However, this is a significant reduction from 34.2% witnessed in November 2023. As fiscal spending increases, bank credit to the government is likely to grow, which should elevate deposits and broad money supply. The report said "However, the extent of foreign capital inflows and the RBI's policy for managing these inflows remain uncertain". Last month, RBI governor Shaktikanta Das had also addressed this issue in the 50th meeting of MPC (Monetary Policy Committee). Per him, deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. "While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies. Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries", Das said. Per him, while bank deposits continue to remain dominant as a percentage of financial assets owned by households, their share has been declining consistently, since households are now increasingly allocating their savings to mutual funds, insurance funds, pension funds and other avenues.

Loan-to-deposit ratio will subside on its own in coming months, notes Motilal Oswal report

<ul class="summary-list"><li>Car buying has been completely upended by a number of factors in recent years.</li><li>Car dealers are still dealing with one key challenge.</li></ul>Car shoppers are being hit by <a target="_blank" href="https://www.businessinsider.com/car-buying-shopping-tips-dealers-inventory-pricing-interest-rates-pandemic-2023-3">skyrocketing interest rates</a>, record <a target="_blank" href="https://www.businessinsider.com/car-loan-increases-dealers-kia-ford-toyota-gm-subaru-2023-1">monthly loan payments</a>, and <a target="_blank" href="https://www.businessinsider.com/car-buying-prices-inventory-best-deals-dealerships-2023-8">stubbornly expensive sticker prices</a>, all of which make for a <a target="_blank" href="https://www.businessinsider.com/car-dealerships-shopping-inventory-prices-incentives-2023-1">tricky auto-buying market</a> right now.But their <a target="_blank" href="https://www.businessinsider.com/car-dealers-face-identity-crisis-tesla-threat-2023-3">dealers are being faced with their own challenges</a> — including one factor that is keeping auto retail unpredictable.There's one key metric that sums up everything pummeling dealerships right now: Floor plan expenses.Floor planning allows dealers to finance expensive cars to have as inventory, essentially saving them from buying the car outright. Those loans are repaid with interest when the vehicles are sold. The longer a car sits on the lot, coupled with high interest rates, the higher the cost to keep inventory around.Total floorplan spending for public dealer groups in the US (including giant firms like AutoNation, Lithia, and Group 1) was $126.7 million in 2021, according to Kerrigan Advisors. That number rose to $202.6 million last year, and in the first nine months of 2023, has hit a whopping $363.1 million.Ask anyone in the auto retail business, and they'll tell you these costs are through the roof."You have a $50,000 unit, it could cost you several hundred thousand dollars a month just in interest to hold that unit," Eric Frehsee, president of the Tamaroff Group of dealerships, told Insider last month. "And at some point, we need to sell it."<h2>That's especially challenging as it relates to EVs</h2>As automakers churn more <a target="_blank" href="https://www.businessinsider.com/ev-sales-getting-tougher-car-dealers-say-2023-10">electric cars</a> off assembly lines and send more of this inventory to their dealer lots across the country, unsold models are stacking up.Regardless of whether that's a natural function of scaling a new product, or a signal of something on the demand front, <a target="_blank" href="https://www.businessinsider.com/dealers-turning-away-evs-velectric-cars-demand-cools-inventory-2023-8">EVs are costing dealers a lot just to sit there</a>.<a target="_blank" href="https://www.businessinsider.com/auto-dealerships-inventory-electric-vehicles-gas-cars-key-problems-2023-6">EV inventory is growing</a>. It's taking <a target="_blank" href="https://www.businessinsider.com/electric-vehicle-inventory-most-least-dealerships-availability-hyundai-kia-2023-6">much longer to sell these cars than their gas-powered counterparts</a>. And it's not entirely that consumers don't want them — as <a target="_blank" href="https://www.businessinsider.com/auto-executives-coming-clean-evs-arent-working-2023-10">parts of today's news cycle might suggest</a> — there are still significant barriers to adoption.Cost remains a key part of the electrification equation, and this next wave of EV shoppers <a target="_blank" href="https://www.businessinsider.com/electrc-vehicle-demand-problem-affordability-expense-price-cost-2023-10">simply aren't willing to shell out more than they could for an internal combustion engine vehicle</a>, regardless of the potential gas savings. Not to mention <a target="_blank" href="https://www.businessinsider.com/electric-vehicles-pricing-mass-market-luxury-parity-2023-10">a dearth of smaller, more affordable models </a>and <a target="_blank" href="https://www.businessinsider.com/electric-vehicles-charging-stations-where-to-plug-in-2030-2023-1">lagging charging infrastructure</a> in wide swaths of the country.<h2>What this means for buyers</h2>To be sure. EV <a target="_blank" href="https://www.businessinsider.com/buy-electric-vehicle-january-for-better-tax-credits-but-caveats-2023-10">costs are coming down thanks to federal tax credits</a>, a slew of various <a target="_blank" href="https://www.businessinsider.com/new-electric-vehicles-hitting-market-even-as-demand-slumps-2023-10">models</a>, and <a target="_blank" href="https://www.businessinsider.com/how-to-charge-non-tesla-ev-at-supercharger-models-adapters-2023-7">infrastructure investment</a>, but that all will take some time.In the meantime, dealers risk swallowing the expense of keeping those around or finding some way to send customers home with one.As a result, buyers can find all sorts of <a target="_blank" href="https://www.businessinsider.com/electric-vehicle-incentives-at-dealerships-high-affordability-price-parity-2023-10">manufacturers' incentives</a> and <a target="_blank" href="https://www.businessinsider.com/electric-vehicles-selling-for-for-less-than-sticker-price-deals-2023-10">dealer discounts</a> that make an EVs' hefty price tag more palatable.The same goes for non-plug-in vehicles; the longer a car sits on a lot, the more it costs a dealer. Look out for vehicle makes and models that aren't in high demand or might have excess inventory, and dealers are likely to want to find a way to get you in it.Are you a car dealer? Have you bought a car recently or are you in the market for a car? Have a tip or opinion to share? Contact this reporter at <a target="_blank" rel="noopener noreferrer" class="c-link" href="mailto:astjohn@insider.com">astjohn@insider.com</a>

One of car dealers' most closely watched cost metrics is skyrocketing

<ul><li>The overall credit demand stands at $220 billion, yet only $165 billion is serviceable, says a report by Redseer and GetVantage.</li><li>Formal lending systems like banks have only been able to service 30% of the overall credit demand.</li><li>Alternate finance systems like recurring-revenue advances and trade receivable financing have the potential to double their share in five years. </li></ul>Indian digital small and medium sized enterprises (SMEs) are on a growth path but suffer from a working capital deficit of around $112 billion — as only $53 billion was injected via various channels. As per a report by Redseer and GetVantage, the overall credit demand stands at $220 billion, yet only $165 billion is serviceable. “Small businesses account for 90% of credit demand but continue to struggle to raise capital, owing to poor business metrics, limited assets, and uncertain growth projections. If the current economic and regulatory climate continues, this gap is likely to widen significantly over the next five years,” said Kanishka Mohan, partner at Redseer. Moreso, as more businesses go digital along with growth in new-age businesses, the demand for credit will only grow. The report estimates that in the next five years, as the number of digital SMEs doubles, the demand for credit is expected to cross $570 billion. Advantage Alt-Fi Formal lending systems like banks have only been able to service 30% of the overall credit demand. Lack of collateral and clear documentation has always been a hindrance for traditional lenders such as commercial banks to provide adequate capital to SMEs. That presents an unprecedented opportunity for alternate-financing platforms, NBFCs and traditional financial lenders (Trad-Fi) like banks to collaborate and catalyze economic growth by prioritizing compliance, governance, inclusion and innovation, opines Bhavik Vasa, founder &amp; CEO of GetVantage. Alternate finance systems include third-party lenders such as revenue-based financing platforms, recurring-revenue advances and trade receivable financing etc. Alternate-finance provides access and flexibility which make these quasi-equity solutions ideal for SMEs. “India is a nation of small businesses, and modern businesses in India deserve modern capital solutions that are fair, accessible, and flexible. Alternate-financing has a vital role to play in extending the limited reach of traditional lenders to serve millions of new-economy businesses and emerging sectors,” says Vasa. At present, the share of alternate finance is around 5%, which Redseer estimates can double to reach to around 11% in the next five years. India has 64 million micro, small, and medium sized enterprises (MSMEs), which contribute to 30% of the nation’s GDP. The sector which is recognized as a crucial growth engine is riddled with challenges such as limited digitization and strained access to capital. Redseer says that only 12% or 7.7 million MSMEs in India are digitized. Yet, businesses that have been able to shift their operations online partly have been able to achieve scale as they could take advantage of new economic opportunities and cost efficiencies.

India’s small digital businesses have a capital problem and this will only grow

<ul><li>A <keyword id="6380214" type="General" weightage="20" keywordseo="credit-score" source="Orion">credit score</keyword> is an important metric that helps in getting <keyword id="6362287" type="General" weightage="20" keywordseo="loans" source="Orion">loans</keyword> and <keyword id="6387037" type="General" weightage="20" keywordseo="credit-cards" source="Orion">credit cards</keyword>.</li><li>A credit score indicates the creditworthiness of an individual to lenders and potential employers.</li><li>Here are the factors that affect your credit score and how you find your <keyword id="15721037" type="General" weightage="20" keywordseo="credit-score-for-free" source="Orion">credit score for free</keyword>.</li></ul>A credit score is important when applying for a loan or credit card. Employers also often consider it to check the financial stability of existing and prospective employees. Now that you know that a credit score is important, you must think about what a credit score is and how it is calculated. <cmsannotation type="cmsannotation" annotationid="What is a credit score?" comment="subhead" text="What is a credit score?">What is a credit score?</cmsannotation> A credit score is a rating between 300 to 900 given by credit bureaus like TransUnion <keyword id="6380215" type="General" weightage="80" keywordseo="cibil" source="Orion">CIBIL</keyword>, Experian, <keyword id="2302542" type="General" weightage="100" keywordseo="crif" source="Orion">CRIF</keyword> High Mark, and others that help identify a user’s creditworthiness. A person with a higher credit score can avail loans at a cheaper interest rate or get a higher credit limit. <cmsannotation type="cmsannotation" annotationid="What are the factors considered to calculate your credit score?" comment="subhead" text="What are the factors considered to calculate your credit score?">What are the factors considered to calculate your credit score?</cmsannotation> Several factors are considered while your credit score is calculated. Here are the top factors that may have an impact on your credit score – <ul><li>Your payment history</li><li>Number of loans and credit cards you have</li><li>Credit utilization</li><li>Recent credit inquiries on your account</li><li>Length of your credit history</li><li>Types of credit availed</li></ul><cmsannotation type="cmsannotation" annotationid="How to check your credit score?" comment="subhead" text="How to check your credit score?">How to <keyword id="15721036" type="General" weightage="20" keywordseo="check-your-credit-score" source="Orion">check your credit score</keyword>?</cmsannotation> It is important to keep track of your credit score to ensure that you have not done anything to adversely affect it. Several applications and websites allow you to check your credit score for free. Do note that each credit bureau has a different methodology for calculating your credit score, meaning your credit score will be different on each report. <cmsannotation type="cmsannotation" annotationid="Credit bureaus" comment="subhead" text="Credit bureaus">Credit bureaus</cmsannotation> <cmsannotation type="cmsannotation" annotationid="Get a free CIBIL report" comment="subhead" text="Get a free CIBIL report">Get a free CIBIL report</cmsannotation> CIBIL allows users to get a free credit report once a month using its website, allowing you to keep track of your credit score. <ul><li>Go to CIBIL’s <a href="https://www.cibil.com/">website</a>.</li><li>Click on “GET FREE CIBIL SCORE &amp; REPORT.”</li><li>Now, create an account by entering your personal information.</li><li>Confirm your identity and enter your PAN.</li></ul>You will receive your credit report in the email you signed up with. <cmsannotation type="cmsannotation" annotationid="Get a free Experian report" comment="subhead" text="Get a free Experian report">Get a free Experian report</cmsannotation> You can also check your credit score on Experian for free. <ul><li>Go to Experian’s <a href="https://www.experian.in/consumer-services">website</a>.</li><li>Click on “Free Credit Score.”</li><li>Now, enter your phone number and click on “Send OTP.”</li><li>Enter the OTP and click on “Verify.”</li><li>Enter your personal details and click on “Get Report.”</li></ul>You will receive your credit report in your email. <cmsannotation type="cmsannotation" annotationid="Get free CRIF report" comment="subhead" text="Get free CRIF report">Get free CRIF report</cmsannotation> You can also get your free CRIF report from the bureau’s website. <ul><li>Go to the CRIF High Mark <a href="https://www.crifhighmark.com/">website</a> and click “Get your score now.”</li><li>Enter the required details and click on “GET MY CREDIT SCORE.”</li></ul>You will receive your credit report by email. If you do not wish to use the websites of these credit bureaus to check your score, you can also use the below applications to check your credit score for free. <cmsannotation type="cmsannotation" annotationid="Check your credit score for free on WhatsApp" comment="subhead" text="Check your credit score for free on WhatsApp">Check your credit score for free on WhatsApp</cmsannotation> Experian has launched a new service that allows you to use WhatsApp to check your credit score for free. <ul><li>Click on the <a href="https://api.whatsapp.com/message/ZF22WUR5A54MC1?autoload=1&amp;app_absent=0">Experian API</a> link from your phone and tap on send.</li><li>Now, click on “View Credit Report.”</li><li>Now, enter your name and tap on send.</li><li>Then, enter your email ID and click on send.</li><li>Click “Yes” if your mobile number is registered to your credit account.</li><li>If not, click “No” and share your registered number.</li><li>Then, click “Send OTP “ and enter the OTP you received.</li></ul>You will receive your credit report in your email. <cmsannotation type="cmsannotation" annotationid="Check CIBIL and Experian score for free on OneScore" comment="subhead" text="Check CIBIL and Experian score for free on OneScore">Check CIBIL and Experian score for free on OneScore</cmsannotation> OneScore, an app developed by FTL Technologies, allows you to check your CIBIL and Experian scores for free once a month. <ul><li>Download the OneScore app from the <a href="https://play.google.com/store/apps/details?id=tech.fplabs.score&amp;hl=en_IN&amp;gl=US">Play Store</a> or the <a href="https://apps.apple.com/in/app/onescore-credit-score-insight/id1462059417">App Store</a>.</li><li>Open the app and enter the required details, including your phone number and PAN.</li></ul>Once you have entered all the required details, your credit score will be fetched, and you can view important information on the OneScore app. Your credit reports will be sent to your email. <cmsannotation type="cmsannotation" annotationid="Check your Experian and CRIF score for free on CRED" comment="subhead" text="Check your Experian and CRIF score for free on CRED">Check your Experian and CRIF score for free on CRED</cmsannotation> Popular fintech Cred is another app that allows you to check your credit score for free. <ul><li>Download the CRED app from the <a href="https://play.google.com/store/apps/details?id=com.dreamplug.androidapp&amp;hl=en_IN&amp;gl=US">Play Store</a> or the <a href="https://apps.apple.com/in/app/cred-credit-card-bill-payment/id1428580080">App Store</a>.</li><li>Enter your mobile number and other personal information.</li><li>CRED will fetch your Experian and CRIF credit reports for free.</li></ul>You will be able to view your credit score on CRED, and you will receive the credit reports in your email. SEE ALSO: <a href="https://www.businessinsider.in/tech/news/what-is-chatgpt-and-how-does-it-work/articleshow/95994901.cms">ChatGPT is a new AI chatbot that can find mistakes in your code or write a story for you</a> <a href="https://www.businessinsider.in/tech/mobile/news/google-pixel-fold-the-companys-foldable-phone-could-soon-become-a-reality-as-it-appears-on-geekbench-ahead-of-its-launch-next-year/articleshow/96021605.cms">Google Pixel Fold, the company’s foldable phone, could soon become a reality as it appears on Geekbench ahead of its launch next year</a> <a href="https://www.businessinsider.in/tech/apps/news/whatsapp-introduces-the-message-yourself-feature-working-on-voice-status-updates-and-more/articleshow/95851566.cms">WhatsApp introduces the “Message Yourself” feature, working on voice status updates and more</a>

How to find your CIBIL, Experian and CRIF credit score for free

<ul><li>Rising inflation has dampened overall credit card spends in August, but experts say they will bounce back in September thanks to festival sales.</li><li>Overall, Indians spent over ₹1 lakh crore for the sixth consecutive month, and the average dues have continued to rise.</li><li>Indians also spent three times as much using credit cards versus debit cards while buying things on e-commerce websites.</li></ul>Credit card users have spent over ₹1 lakh crore now for the sixth consecutive month. In August, credit card users spent ₹1.13 lakh crore in August, down from ₹1.17 lakh crore in July. This is despite a decline of 2 million in terms of active credit cards in August – the fall is due to RBI’s new guidelines. Trends suggest that people will continue to swipe more credit cards and their spending will hit the ₹1.2 lakh crore mark in September. The spends in September are expected to be buoyed by festive sales across e-commerce and offline retail platforms, after ecommerce spends fell in August. “Upcoming e-com festive sales (Big Billion day and Great Indian Festival) are likely to revive the e-com mix (% of total spends) back to Apr-Jul '22 levels,” said a report by <keyword id="46909" type="General" weightage="80" keywordseo="icici-securities" source="Orion">ICICI Securities</keyword>. A rise in prices and Indians’ love for travel has set the perfect tone for an increase in overall credit card outstandings. “Revival in air travel, hospitality sector as well as increasing inflation outlook set a positive backdrop to credit card spend as well as receivables,” the report added. Indians being tired of not going out anywhere for two years due to the Covid-19 pandemic has helped boost demand in the hospitality sector, according to a report by ratings agency CARE. “FY22 has been a promising year for the sector wherein the revival in the occupancy and RevPAR has led to green shoots for the industry players. The decline in Covid cases, resumption of international flights from March 2022, and strong leisure and wedding demand are the positive factors that should lead to growth in occupancy and ARRs in FY23,” the CARE report said. Dues per card continued their upward trajectory, too. “Receivables, in terms of CC outstanding per CIF at industry level, have trended from ₹18,000 as of December 2021 to ₹20,100 for January to May 2022 and increased to ₹20,300 in July 2022,” the ICICI Securities report added. <cmsannotation type="cmsannotation" annotationid="Here’s a snapshot of the Indian credit card industry" comment="subhead" text="Here’s a snapshot of the Indian credit card industry">Here’s a snapshot of the Indian credit card industry</cmsannotation> <keyword id="6357149" type="General" weightage="80" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> continues to lead the market in total credit cards and spends. <div type="image" title="Credit Card market share August 2022." msid="94537974" hostid="261" caption="&amp;lt;p&amp;gt;Credit card market share August 2022&amp;lt;/p&amp;gt;"></div> However, SBI Card is closing the gap in terms of credit cards in force. <div type="image" title="Credit cards in force trend Jan-Aug 2022." msid="94537984" hostid="261" caption="&amp;lt;p&amp;gt;Credit cards in force&amp;lt;/p&amp;gt;"></div> Despite accounting for only 21% of the total credit cards in use, HDFC Bank users spent 29% of the total money. <div type="image" title="Credit card spends market share August 2022." msid="94537997" hostid="261" caption="&amp;lt;p&amp;gt;Credit card spends market share August 2022&amp;lt;/p&amp;gt;"></div> As far as spends are concerned, HDFC Bank continues to go from strength to strength. <div type="image" title="Credit card spends per card trend Jan-Aug 2022." msid="94538006" hostid="261" caption="&amp;lt;p&amp;gt;Credit card spends per card trend&amp;lt;/p&amp;gt;"></div> However, HDFC Bank credit card users aren’t the most lavish spenders – and two unassuming names are in a tug of war when it comes to this. <a href="https://www.businessinsider.in/finance/banks/news/indusind-bank-has-most-valuable-credit-cardholders-in-india-compared-to-hdfc-sbi-citi/articleshow/91784122.cms">IndusInd Bank was once the leader in this metric</a> – it was<a href="https://www.businessinsider.in/finance/banks/news/indians-love-for-travel-is-so-strong-that-its-boosting-credit-card-spends/articleshow/93859780.cms"> dethroned by Bank of Baroda in July</a> – and now it has won back its throne again. <div type="image" title="Credit card value per card August 2022." msid="94538034" hostid="261" caption="&amp;lt;p&amp;gt;Credit card value per card&amp;lt;/p&amp;gt;"></div> SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/adani-greens-54-rally-tempts-totalenergies-to-book-profits/articleshow/94529227.cms">Adani Green’s 54% rally this year tempts TotalEnergies to book profits</a> <a href="https://www.businessinsider.in/retail/news/jewellery-chains-are-growing-at-the-cost-of-standalone-jewellers-and-its-only-going-to-get-worse-says-world-gold-council-report/articleshow/94510142.cms">Jewellery chains are growing at the cost of standalone jewellers – and it’s only going to get worse, says World Gold Council report</a> <a href="https://www.businessinsider.in/business/telecom/news/amid-concerns-of-jio-airtel-duopoly-analysts-suggest-new-telecom-bill-empowers-govt-to-maintain-competition/articleshow/94502923.cms">Amid concerns of Jio-Airtel duopoly, analysts suggest new telecom bill empowers govt to maintain competition</a>

E-commerce sales likely to drive credit card spends in September even as active cards decline

<ul><li>Indian banks are on course to repeat their stellar Q3 performance again in Q4, driven by a strong momentum in credit growth as well as a decline in provisions. </li><li>While strong performance is all but given, eyes are now on what lies ahead for Indian banks. </li><li>From <keyword id="182694" type="General" weightage="20" keywordseo="casa-deposits" source="Orion">CASA deposits</keyword> falling to a 7-year low in FY23, to economic slowdown forcing the brakes on <keyword id="411493" type="General" weightage="20" keywordseo="credit-offtake" source="Orion">credit offtake</keyword>, here are the key things to watch out for as Indian banks head into the Q4 <keyword id="198950" type="General" weightage="20" keywordseo="earnings-season" source="Orion">earnings season</keyword>.</li></ul>Indian banks are on course to repeat their stellar Q3 performance again in Q4, driven by a strong momentum in credit growth as well as a decline in provisions. While strong performance is all but given, eyes are now on what lies ahead for Indian banks. Analysts caution that there could be a few uncertainties on the horizon. One of those concerns is already reflected in the share of CASA (current account and savings account) deposits of banks, which have hit a 7-year low of 11.7% as part of the overall deposits. According to data from the Reserve Bank of India, since FY14, the share of CASA in overall deposits was the highest in FY22 at 12.7%. It has seen a sharp decline of 106 basis points since then. <a href="https://public.flourish.studio/visualisation/13360978/">https://public.flourish.studio/visualisation/13360978/</a> CASA deposits are one of the cheapest sources of funds for banks, and a decline in these deposits means banks have to go for relatively more expensive alternatives. While interest rate on savings account deposits has remained in the range of 3%, a hike in interest rates by the RBI’s Monetary Policy Committee (MPC) has made fixed deposits a better option – interest rate on fixed deposits has increased by an average of 100 basis points, with State Bank of India offering as much as 7% interest on FDs. Looking beyond the CASA fall: Margin pressures, risk of slowdown in loan growth Apart from the slowdown in CASA deposits, a likely increase in margin pressures and risks of a sharp slowdown in loan growth are some of the key factors to watch out for going forward, according to analysts. “We are probably closer to the peak on net interest margin for banks as the cost of funds is likely to move faster than lending yields,” said a report by Kotak Institutional Equities. Concerns of a looming economic slowdown could also lead to a slowdown in loan growth, and there are minor signs pointing at a moderation already. According to the latest data from the Reserve Bank of India, credit growth stood at 15.7% year-on-year in March 2023, down from the highs of 18% seen in October last year. This was primarily led by a slowdown in corporate loans, and “signs of some sluggishness in retail are also on the horizon due to rising interest rates”, said a report by Emkay Global. Expect healthy performance in a seasonally strong quarter The March quarter is considered a seasonally strong one for banks, and there is a broad analyst consensus that banks will post strong growth across key metrics like net interest income, net interest margins, credit growth and asset quality improvements. Analysts expect robust credit offtake, pegging the growth in loan book to be around 17%. Net interest margins are expected to remain steady as lenders continue to transmit repo rate hikes, offsetting the increase in deposit costs. “Healthy growth, steady margins and normalised credit cost is expected to keep earnings momentum unabated at 33.7% year-on-year ₹42,975 crore,” said a report by ICICI Direct. Analysts at Emkay Global have pencilled in a minor slow down on a sequential basis, but maintained that by and large, earnings growth is expected to remain healthy. While the overall scenario for Indian banks in Q4 looks optimistic and a repeat of Q3 is likely on the cards, especially post the business updates given by HDFC Bank and IndusInd Bank, the focus is now on the future outlook and it will be one of the key things to watch out for heading into the Q4 earnings season. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/fpis-offload-it-oil-gas-stocks-worth-13734-crore-in-march/articleshow/99375107.cms">FPIs offload IT, oil &amp; gas stocks worth ₹13,734 crore in March; remain net sellers of Indian stocks for 2 years running</a> <a href="https://www.businessinsider.in/business/telecom/news/telecom-companies-q4-revenue-likely-to-moderate-due-to-lack-of-significant-tariff-hikes/articleshow/99368163.cms">Telecom companies’ Q4 revenue likely to moderate due to lack of significant tariff hikes</a> <a href="https://www.businessinsider.in/finance/news/rbi-revises-indias-fy24-growth-outlook-expects-softer-inflation-on-the-back-of-lower-commodity-prices/articleshow/99290005.cms">RBI revises India’s FY24 growth outlook, expects softer inflation on the back of lower commodity prices</a>

Strong Q4 on the cards, but concerns emerge on fall in CASA deposits and credit offtake slowdown

<ul><li>The SVB collapse is going to make it a lot more expensive for companies with bad credit to raise capital.</li><li>The spread on junk-rated bonds relative to US Treasuries has surged to the widest level since December 30.</li><li>SVB's fall also eliminates a key source of funding for start-ups that would typically be denied by traditional banks.</li></ul>The dust has yet to settle from the <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-collapse-interest-rate-hikes-financial-risks-2023-3?_gl=1*oquwl0*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY3ODgxNDkwMS44MzkuMC4xNjc4ODE0OTAxLjAuMC4w">sudden collapse of Silicon Valley Bank</a>, but one thing is for sure: the chaotic event has made it a lot more expensive for companies with bad credit to raise capital.Since the FDIC took over SVB Financial on Friday, credit spreads on junk-rated bonds relative to US Treasuries <a href="https://fred.stlouisfed.org/series/BAMLH0A3HYC" target="_blank" rel="noopener">have widened by 64 basis points to their highest level</a> since December 30, soaring above 1,100 basis points. That means junk-rated companies that seek to raise funds by selling bonds in the coming weeks will have to pay more to borrow, as investors seek higher compensation for the risk they're taking on in <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-collapse-interest-rate-hikes-financial-risks-2023-3?_gl=1*oquwl0*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY3ODgxNDkwMS44MzkuMC4xNjc4ODE0OTAxLjAuMC4w">the wake of the biggest banking crisis since 2008.</a>But it's not just junk-rated companies that will face higher fund-raising costs. Credit spreads for investment grade companies have also risen in recent days as investors reprice risk across the spectrum of corporate credit quality. The spillover effect of higher fundraising costs is also set to impact countless small startups that relied on Silicon Valley Bank to offer loans and extend lines of credit to companies that lacked profits, and sometimes even revenue. The knock-on effect means tech mergers could soar 20% this year due to "a much tighter financing environment post SVB," Wedbush analyst <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-collapse-spark-wave-startup-technology-mergers-wedbush-2023-3?_gl=1*1nu3qr3*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY3ODgxNDkwMS44MzkuMS4xNjc4ODE0OTYwLjAuMC4w">Dan Ives said in a recent note.</a>"The reliance on the VC community and private funding world will be even more important with traditional financing means through the banking system much more stringent looking ahead," Ives said.And for the smaller companies that don't get bought out or find new sources of affordable financing, bankruptcy could be imminent as higher financing costs puts pressure on profits, according to Ninety One portfolio manager Iain Cunningham. "We are now beginning to see early signs of businesses that built their operating models around the false equilibrium [of near-zero interest rates] begin to struggle," Cunningham said in a Monday note. That's leading to more zombie companies, or companies that rely on low financing costs to fund their business, that could ultimately default."There are the things we can't see yet, which have a habit of floating to the surface as the rising cost of money and slowing growth begin to place pressure on cash flows," Cunningham said. The fundraising environment could get even more difficult if the Federal Reserve moves forward with another interest rate hike at its FOMC meeting next week.Financing costs have already soared considerably since the first rate hike of this cycle began in March 2022, and more rate hikes will only pile on to the burden. The market currently expects the Fed to hike interest rates by 25 basis points next week. To blunt the rise in financing costs, companies need to take action, according Embarc Advisors' Jay Jung. "Startups need to change their mindset and adapt to the new expensive capital environment. Reduce cash burn and identify opportunities to achieve more with less. Monitor metrics closely as we are not in a growth at all costs regime," Jung told Insider.

SVB's collapse completely screwed things up for companies with bad credit

<ul class="summary-list"><li>The credit ratings of US banks have come under the spotlight recently amid the banking crisis.</li><li>SVB tried to avoid a ratings downgrade by selling bonds, but that backfired and caused a bank run.</li></ul>Right under the big, bold headlines of the banking crisis, there's usually mention of banks' credit ratings.On Monday, for example, <a href="https://markets.businessinsider.com/news/stocks/moodys-silicon-valley-bank-outlook-signature-failure-economy-downgrade-system-2023-3" target="_blank" rel="noopener noreferrer">Moody's downgraded its outlook</a> for the entire US banking sector while placing the ratings of six of the country's banks — including <a href="https://markets.businessinsider.com/news/stocks/svb-collapse-first-republic-western-alliance-moodys-downgrade-banking-crisis-2023-3" target="_blank" rel="noopener noreferrer">First Republic and Western Alliance</a> — under review for a downgrade.As panic shoots across the banking sector, US banks' credit ratings have come under the spotlight, and investors are zooming in on how these institutions are graded.First things first, who are these ratings agencies?Moody's, S&amp;P Global, and Fitch are three big credit ratings agencies that <a href="https://www.ig.com/sg/trading-strategies/credit-rating-agencies--everything-you-need-to-know-191218" target="_blank" rel="noopener">control</a><a href="https://www.ig.com/sg/trading-strategies/credit-rating-agencies--everything-you-need-to-know-191218" target="_blank" rel="noopener"> about 95% of the credit ratings</a> in the financial markets. They assess the creditworthiness of a company or a country's sovereign bonds, so a downgrade — or, a negative read of the creditworthiness — is significant.Each of the big three agencies expresses credit ratings on a different scale, but they are generally in the form of letters in the alphabet. They go from AAA to D at <a href="https://www.spglobal.com/ratings/en/about/intro-to-credit-ratings" target="_blank" rel="noopener">S&amp;P Global</a> and <a href="https://www.fitchratings.com/products/rating-definitions#ratings-scales" target="_blank" rel="noopener">Fitch,</a> to AAA to C at <a href="https://www.moodys.com/sites/products/productattachments/ap075378_1_1408_ki.pdf" target="_blank" rel="noopener">Moody's.</a>This is not a new concept. In fact, during the <a href="https://www.businessinsider.com/personal-finance/what-caused-the-great-recession">global financial crisis</a>, credit ratings agencies had been blasted for giving <a href="https://www.businessinsider.com/alliancebernstein-on-credit-ratings-2015-4">better ratings to risky mortgage-backed securities and collateralized loans</a>.But they are still widely followed by investors."Ratings are not perfect," Eugene Grinberg, the CEO of SOLVE, a market data provider for fixed-income securities, told Insider. "But they do still matter since they allow for an apples-to-apples comparison between two issuers."This is because the financials of companies are complex and investors can't get a fuller picture from these alone."Rating agencies track issuers for many years and are able to identify changes in company performance that may not be evident from their financial statements alone," Grinberg added.<h2>What are credit ratings and why do they matter for banks?</h2>Companies raise funds for expansion or new ventures via fundraising. To raise funds, they can either issue equity — i.e. a stake in the company — or issue debt. One way to issue debt is through bonds — an instrument which is repayable after a set period and one that accrues interest in pre-set installments. If a company face troubles, investors could stop receiving interest payments and risk their principal investments in the bonds — constituting a default. Credit ratings agencies provide independent assessments of the risk that this could happen.<a href="https://www.businessinsider.com/personal-finance/what-are-junk-bonds">Depending on the rating,</a> a bond can be classified as an investment-grade or speculative-grade investment. A so-called junk bond falls below the investment-grade credit rating at various credit agencies.Credit ratings agencies have their own methodology when determining creditworthiness — which explains why not all agencies may downgrade a company's debt at the same time. Similarly, a company will generally have to demonstrate that it has a lower risk of default to get an upgrade."Rating agencies have a few thresholds in terms of financial ratios that an issuer needs to pass to get an upgrade. Each ratio is not just historical but projected in the next one year ahead," Warut Promboon, managing partner at Hong Kong-based research firm Bondcritic, told Insider. So, the company management needs a plan to convince rating agencies they will be able to pass the thresholds within a year to get an upgrade, he added.Many metrics — such as management and corporate governance — are also qualitative, "so it is also about management looking good in the agency's eyes," he added.<h2>What happened with SVB's botched capital call?</h2>A downgrade to junk status by a credit ratings agency is serious business as it is not just reputational damage for companies that could impact investor confidence, but — just like how <a href="https://www.businessinsider.com/personal-finance/what-is-a-credit-score">personal credit scores</a> work — it also means companies have to pay out a higher interest rate to investors because they are now deemed to be riskier.It is exactly the threat of downgrade that contributed to Silicon Valley Bank's demise, <a href="https://www.reuters.com/markets/us/silicon-valley-banks-demise-began-with-downgrade-threat-sources-2023-03-11/" target="_blank" rel="noopener">Reuters</a> reported on March 11, citing two people familiar with the situation.Silicon Valley Bank had parked much of its customers' deposits into bonds because its tech-focused customers didn't need a lot of loans during the tech boom during the pandemic. But as the industry started to draw down on deposits amid a <a href="https://www.businessinsider.com/economic-downturn-tech-industry-layoffs-stock-plunge-funding-slowdown-2022-6">slowdown in the sector,</a> Silicon Valley Bank found itself in a position where it had to sell some assets to meet customers' withdrawal requests. Moody's communicated to the bank that it was preparing to downgrade its rating as the value of its bonds was falling due to rising interest rates, per Reuters. To avoid the downgrade, Silicon Valley Bank sold a bond portfolio. However, the <a href="https://www.businessinsider.com/silicon-valley-bank-failure-what-happened-bank-run-explained-2023-3">bonds it could readily sell have lost value</a> due to the Federal Reserve's <a href="https://www.federalreserve.gov/monetarypolicy/openmarket.htm" target="_blank" rel="noopener">aggressive rate hikes</a> over the past year — because the value of the bonds moves inversely to interest rates.The bank then disclosed it was facing a <a href="https://www.businessinsider.com/svb-failure-what-the-hell-happened-2023-3">$1.8 billion loss</a> on the sale and then tried to recoup the losses by trying to sell stock and issuing related securities that would generate higher returns.But these actions <a href="https://www.businessinsider.com/svb-silicon-valley-bank-startups-worry-run-pull-accounts-2023-3?utm_medium=ingest&amp;utm_source=markets" rel="">triggered concerns</a> among tech VCs and founders about Silicon Valley Bank's financial stability, spurring an old-fashioned bank run and sparking fears of contagion in the banking sector, particularly in smaller, regional banks.Silicon Valley Bank was <a href="https://www.businessinsider.com/svb-failure-what-the-hell-happened-2023-3?utm_medium=ingest&amp;utm_source=markets" rel="">shut down by regulators</a> on Friday, but not before spooked depositors also made a run on deposits at crypto-friendly <a href="https://www.businessinsider.com/signature-bank-shut-down-by-regulators-depositors-bailed-out-2023-3">Signature Bank, New York,</a> which faced a similar fate on Sunday.Consumers are now <a href="https://markets.businessinsider.com/news/stocks/svb-collapse-silicon-bank-valley-jpmorgan-wall-street-depositors-2023-3?_ga=2.202270355.366464223.1678856528-1306638491.1633320106">moving their deposits from smaller to larger banks</a>, such as Bank of America, Citigroup, and JPMorgan Chase, the <a href="https://www.ft.com/content/2b580939-a4b6-48d2-8eb6-629b4cb1e06c" target="_blank" rel="nofollow noopener">Financial Times</a> reported, citing sources familiar with the matter.<h2>First Republic has been downgraded to junk. Now what?</h2>Fears of the crisis spreading have also hit the credit ratings of First Republic Bank.<a href="https://markets.businessinsider.com/news/stocks/svb-first-republic-bank-credit-ratings-downgrade-junk-fitch-frc-2023-3" rel="">Ratings agencies S&amp;P Global and Fitch</a> cut First Republic's credit rating to junk status on Wednesday over concerns that depositors could pull funds from the lender."We believe the risk of deposit outflows is elevated at First Republic Bank despite the actions of federal banking regulators and the bank actively increasing its borrowing availability to mitigate risk associated with the bank failures over the last week," <a href="https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/2960193" target="_blank" rel="noopener nofollow">wrote S&amp;P Global Ratings analysts Nicholas Wetzel and Rian Pressman</a>. First Republic Bank is now <a href="https://www.businessinsider.com/svb-crisis-first-republic-bank-possible-sale-ratings-junk-2023-3">considering various options</a> —including a sale – <a href="https://www.bloomberg.com/news/articles/2023-03-15/first-republic-bank-is-said-to-weigh-options-including-a-sale" target="_blank" rel="noopener nofollow">Bloomberg</a> reported Wednesday, citing people with knowledge of the matter. The San Francisco-based lender is also looking at options to boost liquidity, per the news outlet.

How credit ratings are playing a key role in the unfolding banking crisis

New Delhi, Feb 28 () Fitch Ratings on Friday said HPCL-Mittal Energy Limited's credit metrics over 2019-20 and 2020-21 financial years would worsen by more than previously expected due to near-term weakness in refining margins and a faster pace of its petrochemical (petchem) capex. Earlier this week, Moody's Investors Service downgraded the corporate family rating of HMEL to Ba2 from Ba1 due to weak refining margins arising from a slump in fuel demand. In a statement, Fitch Ratings said while credit metrics will worsen in the current and the next financial year, "an accelerated earnings contribution from petchem will lead to faster deleveraging, resulting in net leverage (as defined by adjusted net debt/operating EBITDAR) coming down to below 5-times by FY23." The net leverage is still within Fitch's negative rating sensitivities for HMEL's Standalone Credit Profile (SCP) of 'bb-'. HMEL expects to start commercial operations of its petchem project by April 2021, a year ahead of its previous expectation. It spent R 3,800 crore during the first nine months of current fiscal and is likely to top Rs 6,000 crore for the financial year, compared with Fitch's previous expectations of Rs 3,500 crore. The company, which operates an 11.3 million tonnes a year oil refinery at Bhatinda in Punjab, is in the process of setting up a dual-feed petrochemical capacity of 1.2 million metrics tons per annum (mtpa). The project, which commenced in October 2017, was originally planned to be completed by March 2022. However, the company now intends to complete it by April 2021. The firm, which is an equal joint venture of Hindustan Petroleum Corp Ltd (HPCL) and steel czar Lakshmi N Mittal's Mittal Energy Investments, expects FY22 to be the first full year of petchem operations, with an EBITDA contribution of around USD 400-500 million. "However, we have assumed that it takes longer for the petchem project to stabilise and turn profitable, contributing around USD 115 million of EBITDA in FY22," it said. Fitch expects net leverage to peak at around 7x over FY20-FY21, before improving to below 5x in FY22 and below 4x in FY23. The leverage spike in FY21 is also affected by a one-off 60-day shutdown period for major maintenance of the refinery and integration of the petchem operations. "We had earlier expected leverage to range around 6x during FY20-FY21 and fall to around 5x by FY23," it said. HMEL reported EBITDA of Rs 2,600 crore during April-December 2019, with a gross refining margin (GRM) of USD 9.6 per barrel versus USD 10.3 in FY19. The reduction was in line with the industry due to strong new supply from China, volatility in crude prices leading to inventory losses, and falling heavy-fuel oil cracks in light of the tougher marine fuel regulations by the International Maritime Organization IMO from January 2020. Fitch said it has revised down its industry-wide GRM expectations, given the continuing surplus in the refining markets and also weaker-than-expected diesel spreads. The refining margins are also likely to be weighed down by the coronavirus situation in the near term but refining margins are expected to improve over the medium term, benefitting from strong diesel spreads driven by the IMO regulations, it said. "Sustained volatility in GRMs, lower earnings from the petchem project, or weaker demand for petroleum products if COVID-19 prevails for a prolonged period would be credit negative. "Any delays or challenges in the integration of HMEL's petchem project could also have an impact on deleveraging and add downward pressure to HMEL's SCP, which has little headroom at 'bb-'," Fitch added. Bhatinda refinery has high-complexity with a Nelson complexity index of 12.6, allowing for the processing of heavy crude oil and optimisation of product slate. ANZ ANZ MRMR

HMEL's credit metrics to worsen due to weak refining margins: Fitch Ratings

<ul><li>The <keyword id="6358354" type="General" weightage="20" keywordseo="MSME" source="Orion">MSME</keyword> sector is undergoing a quiet but steady revival, going by the increase in credit demand and a moderation in NPAs over the last one year.</li><li>A new report has revealed that thanks to the Indian government’s ECLGS scheme, credit demand in the MSME sector has surged rapidly.</li><li>A closer look at the data also suggests that the micro enterprises will need more assistance and time to recover, while the medium enterprises have rebounded the most.</li></ul>Micro, small and medium enterprises (MSMEs) are a critical cog of the Indian economy, contributing nearly a third to the country’s GDP and half of its exports. Now, in signs of a pickup in economic activity, a new report has outlined that <keyword id="5974967" type="General" weightage="20" keywordseo="MSME-credit" source="Orion">MSME credit</keyword> demand is now 60% higher than pre-pandemic levels. Given the importance of the MSME sector to the Indian economy, the Indian government <a href="https://www.businessinsider.in/india/news/fm-nirmala-sitaraman-announces-six-steps-for-msme-sector/articleshow/75717258.cms">announced the emergency credit line guarantee scheme (ECLGS) during the first wave of the Covid-19 pandemic</a> in the form of a ₹3 lakh crore assistance. This was part of the government’s <a href="https://www.businessinsider.in/policy/economy/news/top-highlights-of-finance-minister-nirmala-sitharaman-speech-on-modi-20-lakh-crore-covid-19-stimulus/articleshow/75714287.cms">larger ₹20 lakh crore stimulus package</a>. The scheme was subsequently extended <a href="https://www.businessinsider.in/finance/news/finance-ministry-extends-emergency-credit-line-guarantee-scheme-till-march-2022/articleshow/86614510.cms">multiple times</a> – with the latest extension lasting up to<a href="https://economictimes.indiatimes.com/news/economy/policy/eclgs-scheme-extended-up-to-march-2023-fm-in-budget/articleshow/89266078.cms"> March, 2023</a>. These measures, according to a MSME Pulse report by credit bureau Transunion <keyword id="6380215" type="General" weightage="20" keywordseo="Cibil" source="Orion">Cibil</keyword> and <keyword id="6391656" type="General" weightage="20" keywordseo="SIDBI" source="Orion">SIDBI</keyword>, have boosted growth in MSME credit demand as well as disbursements – although lenders are prioritising existing borrowers over new ones. <div type="image" title="Credit demand Q4 FY22." msid="93457276" hostid="261" caption="&amp;lt;p&amp;gt;Credit demand amongst MSMEs&amp;lt;/p&amp;gt;"></div> According to the report, credit demand has surged 60% when compared to the pre-pandemic levels, while commercial credit inquiries have also picked up pace in the last one year. Both these metrics are signs of a recovery in economic and business activity, the report stated. <cmsannotation type="cmsannotation" annotationid="Private lenders more proactive than public sector banks – NBFCs stage a recovery, too" comment="subhead" text="Private lenders more proactive than public sector banks – NBFCs stage a recovery, too">Private lenders more proactive than public sector banks – NBFCs stage a recovery, too</cmsannotation> Interestingly enough, private sector lenders – banks and financial institutions – are a little more proactive than public sector banks in issuing credit. Specifically, while credit from private lenders has seen a 69% increase, that from public sector banks has jumped 60%. Non-Banking Financial Company (NBFCs), which saw a decline in issuing credit in the December 2021 quarter, have since recovered quickly. <div type="image" title="Lender wise credit Q4 FY22." msid="93457315" hostid="261" caption="&amp;lt;p&amp;gt;Lender-wise credit&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="Disbursements growing steadily" comment="subhead" text="Disbursements growing steadily">Disbursements growing steadily</cmsannotation> After plunging during the second wave of Covid-19, credit disbursements have seen a steady growth since then, with the biggest rebound seen in the September 2021 quarter. <div type="Article" hostid="261" msid="93366552" title="Globalized inflation is a threat to global economy itself, says RBI guv Das" mstype="2" mssubtype="0"></div> Interestingly, small enterprises have been beneficiaries of the largest disbursements, followed by medium and micro enterprises. <div type="image" title="MSME loan disbursements Q4 FY22." msid="93457345" hostid="261" caption="&amp;lt;p&amp;gt;MSME loan disbursements&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="Medium enterprises show highest growth in loan size" comment="subhead" text="Medium enterprises show highest growth in loan size">Medium enterprises show highest growth in loan size</cmsannotation> The average loan size has increased rapidly – by nearly 50% – in the medium enterprises segment to ₹1.4 crore, from ₹95 lakh during the first wave of Covid-19. For micro enterprises, they have remained stagnant at ₹9 lakh, in comparison. <div type="image" title="MSME loan size Q4 FY22." msid="93457375" hostid="261" caption="&amp;lt;p&amp;gt;MSME loan size&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="NPAs are on the rise in the micro segment" comment="subhead" text="NPAs are on the rise in the micro segment">NPAs are on the rise in the micro segment</cmsannotation> The medium enterprises segment has the highest rate of non-performing assets (NPAs) in the MSME sector, followed by the micro and the small segments. Interestingly, the micro segment has seen a bigger increase in NPAs, while the small and medium segments have seen a relatively moderate increase when compared to the first wave of Covid-19. Over the last one year, though, NPAs across all the three segments are on the decline, having peaked during the second wave of Covid-19 last year. <div type="image" title="MSME NPAs Q4 FY22." msid="93457389" hostid="261" caption="&amp;lt;p&amp;gt;MSME NPAs&amp;lt;/p&amp;gt;"></div> SEE ALSO: <a href="https://www.businessinsider.in/business/news/mukesh-ambani-is-all-set-to-do-a-jio-with-green-energy/articleshow/93432238.cms">Mukesh Ambani is all set to do a ‘Jio’ with green energy</a> <a href="https://www.businessinsider.in/stock-market/news/why-tejas-fighter-aircraft-maker-hal-share-price-up-in-2022/articleshow/93426056.cms">This defence sector stock boosted investor wealth by 75%</a> <a href="https://www.businessinsider.in/finance/news/rbi-hikes-repo-rate-by-50-basis-point-to-5-4-as-inflation-is-still-uncomfortable/articleshow/93362291.cms">RBI hikes repo rate by 50 basis point to 5.4% as inflation is still ‘uncomfortable’</a>

You Searched For "credit metrics" and got 11 results

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