The growth in bank loans to individuals was 13.7% year-on-year (y-o-y) in May, compared with 19.1% recorded in the same month of 2016, data released by the Reserve Bank of India (RBI) showed. Outstanding retail loans as on May 26 stood at Rs 16.17 lakh crore. Loans to individuals has been clocking growth figures in the mid-to-late teens since May 2015 before signs of a slowdown began to surface in November 2016. In May, outstanding on credit cards grew the most — 32.6% — among all categories of loans to individuals. Housing loans grew 12.1%, as compared to 18.2% in the year-ago period.
Vehicle loans grew 11.9%, while consumer-durable loans dropped 7.8%, as buyers put purchases on hold ahead of the roll-out of the Goods and Services Tax (GST). Credit to the industry contracted on a y-o-y basis for the eighth straight month in May, falling 2.1% to Rs 26.03 lakh crore. In May 2016, the corresponding figure stood at Rs 26.63 lakh crore, up nearly 1% over March 2015. Industrial credit has been falling almost consistently since August, recovering briefly to clock a 0.9% growth in September.
Credit deployment in industry fell 8.7% in the medium segment and 2.1% in large industry. Loans to micro and small industries just managed to report growth by rising 0.1%. Bank credit to industry has been muted for the last couple of years as lenders turned cautious amid worsening asset quality and well-rated corporates chose to raise money from the bond market.
Analysts say that retail loan growth in recent years has been driven by an increase in ticket sizes rather than growth in volumes. In a note dated June 30, Kotak Institutional Equities wrote, “95% of growth in the past five years was driven by increase in the average ticket size in overall retail loans, while the same is 66% and 90% CAGR for housing and auto loans. The lull in lending post the global financial crisis and the rapid increase in asset values during FY2010-13/14 are helping banks deliver relatively easier growth today.”
The report said the vehicle loans business has been moving to mid-market products from entry-level ones. In addition, the increased duration of loans is playing a part in retail growth, even though it is difficult to quantify the boost it may be providing. “We see a fair amount of advertising for 30-year housing loans and seven-year auto loans in the market,” Kotak analysts wrote.