West Bengal and Jharkhand show dismal loan growth while clocking highest rates of default as per a CIBIL report

MUMBAI: West Bengal and Jharkhand have shown the lowest growth in loans for the micro and SME commercial sector for the financial year 2016 while clocking the highest rates of loan defaults and non repayments and Rajasthan has shown the lowest delinquency rates. Further the highest loan growth in the commercial sector was seen in the states of Kerala, Uttaranchal and Karnataka. This comes at a time when West Bengal has also got the dubious distinction of being the state which has shown the highest amount of deposits in Jan Dhan accounts after the demonetisation drive of the government.
In a report released by credit scoring company TransUnion CIBIL, the company said West Bengal and Jharkhand had shown a growth of 1 and 4% respectively while their NPA growth stood at as high as 13% and 12%. States like Gujarat, Haryana and Madhya Pradesh showed sub 5% non performing assets.

The report further added that sectors like leather, textile and steel industries have shown the highest growth of cwhile real estate and construction have shown significant loan growth with less than 6% default rates.

However overall the report also spoke about how credit growth in the medium industries sector has been dismal at 7% whereas micro industries have shown a 17% growth rate and SME has shown a 12% loan growth rate for the financial year 2016. It held MUDRA loans as responsible for the growth that was seen in the micro and small segments of the industries.

“The findings of our research indicate that the business environment is at a cusp of caution in certain sectors and promise in others. Also currently some banks tend to have analytical and strategic focus on 5 or at most 10 states and may not be fully sensitive on industry credit profile divergences. While Rajasthan has lowest commercial credit NPA rate it also has lowest commercial credit exposure growth. Banks also tend to avoid be-spoke high risk/ high NPA industries across exposure class and across regions. In both these approaches a bank is unable to optimize its lending strategy and under lends in industry-geographical clusters which show much lower default rate than the rest of the industry nationally or rest of the geography. Likewise focusing on few states deprive lenders of the opportunity to exhibit calibrated loan growth,” said Satish Pillai, managing director, TransUnion CIBIL.