Retail loan portfolio that had so far helped banks salvage their credit offtake amid deceleration in disbursals to the industry showed signs of slowing down in December indicating that consumers are tightening their purses.
In December, banks' retail loans grew at a pace of 13.7% year-on-year, slower than the 16.3% clocked a month ago, data from Reserve Bank of India show. The slowdown was on account of a sharp contraction in loans for the purchases of consumer durables. Such loans contracted by a whopping 36% year-on-year in December compared with a contraction of 7.8% in November and a growth of 28% in December 2011.
Consumers are cutting down on discretionary spending as confidence levels have reduced, according to a Credit Suisse report.
RBI, too, in third quarter policy review said consumption is decelerating in the economy. Within retail loan, home and auto loans continue to grow at a faster pace. Home loan grew 12.5% and auto loan expanded 22.2% in December.
Credit card outstandings also continued to grow at a faster pace of over 25%.
Meanwhile, credit growth to the industry decelerated to 13.8% year-on-year led by slowing of credit to mid-sized companies. Loans to shipping companies contracted by 20% and those to professional services by 5%.