September second fortnight (Festive Offtake) indicates highest offtake in FY20 YTD despite being substantially lower than the 10 year average

The credit offtake recorded in the end of the second fortnight of September is perhaps one of the strongest indicators of consumer spending in the entire financial year. We have attempted to compare the current financial year’s fortnightly offtake and compare the same with a ten year average, comprising the range from FY10 to FY20.

In order to test the cyclicality of the festive consumption pattern, we have analyzed incremental offtake and deposits numbers. Furthermore, incremental offtake to deposit ratios were calculated to understand the intensity of borrowing during the season. The idea behind this approach pertains to the fact that consumer borrowings vis-à-vis deposits may help in gauging market sentiment during the period under study.

From the data considered, it is revealed that incremental credit offtake in second fortnight in the month of September 2019 (FY20) stood at Rs. 59,653 crores. Meanwhile, incremental deposits stood at Rs. 183,909 crores taking the incremental credit offtake to deposit ratio to 32.4%. When compared to the 10 year average numbers, it is revealed that incremental credit offtake and deposits were recorded at Rs. 107,412 crores and Rs. 175,921 crores, respectively. Consequently, the offtake to deposit ratio comes to 56.9%, which significantly higher than the one observed in the current year.

At Rs. 59,653 crores, even though the incremental offtake number is much smaller than that of the previous year’s fortnight offtake by over Rs. 123,000 crores, it is noted that the former is highest in FY20 YTD. Also worth considering is the fact that the before FY14, the incremental credit offtake during the festive offtake averaged Rs. 50,229 crore. The credit offtake to deposit ratio is therefore recorded at a more amiable 46.3% during the said period. The reason behind offtake level suddenly shooting up post FY14 until FY19 is debatable and requires a separate study, the current year’s number is perhaps not so low in the light of this assessment.

Although comparing the GDP growth with credit offtake (both incremental and gross), we note that the correlation between these two variables comes to less 0.25, which does not explain any statistical relevance. What this means is that the apparently slower economic expansion has little to do with poor offtake figures. Therefore the variables might influence each other in the presence of other determinants, independently, perhaps not so much.

Concluding, the highest offtake right at the onset of the festive season might come as a respite despite the lower than usual number. Nevertheless, the consumption slowdown is matter of concern and must be addressed at the earliest. While the consumption – investment cycle may be a chicken and egg story, the demand for credit remains a gumption.

September 2nd Fortnightly Averages between FY10 and FY20

   Average Deposit (Inc) Cr.


   Average Offtake (Inc) Cr.


   Average Deposit Growth


   Average Offtake Growth


   Average Offtake/ Deposit


   Average GDP Growth


Our exciting journey started in 2005 with rating of bank borrowers most of whom were small and medium enterprises. At that time, credit rating was a concept known only to large issuers of capital market instruments. Since then, like a caterpillar transforms itself into a beautiful butterfly, we transformed to rate bonds, bank facilities of large corporates and issuers across industries. Along came many achievements - SEBI Registration in 2011, RBI accreditation in 2012, 50,000 ratings in 2018, 5,000 Bond and Bank Loan Ratings in 2017, launch of India's first Android and iPhone app to disseminate rating, tamper-proof QR-code-enabled rating rationales, and SMERA Terminal to name a few.

Now is the time to re-emphasize our increasing footprint across all segments of ratings through the launch of our new name - 'Acuité'.

The name has changed. The spirit of upholding highest standards of analytical rigour, continuous improvement, excellence in our processes and quest for innovation remains the same. We would like to re-emphasize that we will continue to work hard to provide independent, unbiased and timely opinion of highest standard.

Acuité means 'sharpness and clarity of thought and vision'. Let our research and ratings help you take decisions with confidence.

Sankar Chakraborti