Growth in mortgages in the banking sector fell to an at least four-year low of 10.5% year-on-year (y-o-y) in July despite most large banks having dropped interest rates on home loans in May. According to data released by the Reserve Bank of India (RBI), the total outstanding on mortgages in the banking system stood at Rs 8.64 lakh crore as on July 21. In June, growth in mortgages had dropped to a four-month low of 11.4% y-o-y. Home buyers, according to bankers, are sitting on the fence anticipating prices will correct further. Retail loans as a category grew 15% y-o-y in July, slower than the 18.8% recorded in July 2016. Outstanding retail loans as on July 21 stood at `16.66 lakh crore. Loans to individuals had 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 July, outstanding on credit cards grew the most — 29.4% — among all categories of loans to individuals. Vehicle loans grew 9.6%, lower than 20.7% in July 2016, while consumer-durable loans dropped 8.5%, compared to a year-ago growth figure of 18.4%. Credit to industry contracted on a y-o-y basis for the tenth straight month in July, falling 0.3% to Rs 26.28 lakh crore. In July 2016, the corresponding figure stood at Rs 26.36 lakh crore, up 0.6% over July 2015. Industrial credit has been falling almost consistently since August, recovering briefly to clock a 0.9% growth figure in September. Credit deployment in industry fell 7.7% y-o-y in the medium segment and 0.1% in the micro and small categories put together.
Loans to large industry remained unchanged from the year-ago period at `21.68 lakh crore. 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 preferring to raise money from the bond market. Bankers do not expect lending for capital expenditure to take off anytime soon. Chanda Kochhar, managing director and chief executive officer at ICICI Bank, said after detailing the bank’s June quarter results that the bank was trying to lower its exposure to industries facing stress. “The SME (small and medium enterprise) business has grown by 18.5% (y-o-y in the June quarter) and in the domestic book, we have actually grown the desirable portion, but we have also reduced the portion that was either NPA or stressed or so on,” Kochhar had said.