India’s Corporate Debt At 8-year Low: Motilal Oswal Institutional Equities

India's corporate debt was at an 8-year low in FY20, while real credit declined for the first time in two decades in 4QFY20, Motilal Oswal Institutional Equities said in a report.

"Banks' total lending grew 6.4 per cent, year-on-year in Mar'20, second only to the multi-decade lowest growth of 5.4% in 4QFY17. However, after adjusting for the inter-financial sector, banks' lending to the non-financial sector grew at an all-time low of 4.7 per cent in 4QFY20. Further, while growth of non-bank lenders was robust in FY17, their credit grew at an all-time low of 3 per cent, year-on-year in 4QFY20.

Consequently, India's non-government non-financial (NGNF) debt - of which banks account for only 57% - grew just 3.9% year-on-year in 4QFY20, marking the slowest growth in the past two decades. As % of GDP, it has plunged to 80.6% in FY20, same as in FY16, " the report said.

According to it, adjusted for headline inflation, real debt declined 2.6% YoY in 4QFY20, marking its first contraction in at least the past two decades.

"NGNF credit growth slowdown was broad-based in 4QFY20, with only external commercial borrowings (ECBs) - accounting for 9% of NGNF debt - growing faster than in 3QFY20. Excluding NBFCs and HFCs, NGNF debt growth stood at 4% YoY - the lowest since 2000 and v/s 5.2% in 3QFY20," the report noted.