Motilal Oswal: India’s Corporate Debt At 8-Year Low In FY20  

Motilal Oswal Report

Real credit declines for the first time in two decades in Q4 FY20. Banks’ total lending grew 6.4% YoY in March 20, second only to the multi-decade lowest growth of 5.4% in Q4 FY17. However, after adjusting for the inter-financial sector, banks’ lending to the non-financial sector grew at an all-time low of 4.7% in Q4 FY20. Further, while growth of non-bank lenders was robust in FY17, their credit grew at an all-time low of 3% YoY in Q4 FY20.

Consequently, India’s non-government non-financial (NGNF) debt of which banks account for only approximately 57% grew just 3.9% YoY in Q4 FY20, marking the slowest growth in the past two decades. As % of Gross Domestic Profit, it has plunged to 80.6% in FY20, same as in FY16. Adjusted for headline inflation, real debt declined 2.6% YoY in Q4FY20, marking its first contraction in at least the past two decades.

Overall, the Covid -19 pandemic hit the economy in mid-March 20; however, the sharp deceleration in credit growth (in line with GDP growth) has been in place for the past 6-7 quarters. With NGNF debt declining for the first time in real terms in Q4FY20, we expect this trend to exacerbate in H1FY21, before recovering in H2FY21. It would be interesting to watch if the NGNF debt would decline in FY21 on an annual basis, following an expected decline of 5% in real GDP.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.