Outstanding loans to the segment dropped a sharp 82% year-on-year (y-o-y) to Rs 3,225 crore on September 28.
Having lent large sums as consumer durables loans, over the past couple of years banks seem to be shying away from them possibly fearing delinquencies. Outstanding loans to the segment dropped a sharp 82% year-on-year (y-o-y) to Rs 3,225 crore on September 28.
Banks may be letting non-banking financial companies (NBFCs) play in this space given how exposure to NBFCs jumped 41.5% in September.
Lenders say there is heightened risk aversion due to defaults on these advances which are given for the purchase of products such as smart devices and home appliances. A year ago, the outstanding credit to this space was Rs 17,846 crore, data released by the Reserve Bank of India (RBI) showed.
Indeed, banks seem to be cautious on loans to individuals as a whole — classified as personal loans by the RBI; at just over 15% y-o-y, the growth has hit a 12-month low in September, analysts at Anand Rathi Research pointed out.
Within the category, the skew shifted in favour of housing loans, which are secured. While the share of personal loans in outstanding non-food credit increased to 25.3% in September 2018 from 24.5% a year ago, in incremental terms it declined from 56% to 32% over the same period.
Incremental share of housing within personal loans is on the rise while loans for durables and education are contracting, the note from AR said.
Analysts say banks are turning cautious about unsecured retail lending after a year or so of dizzy growth in the category. Sujan Hajra, chief economist, Anand Rathi Shares and Stock Brokers, said risk aversion is certainly on the rise at banks. “This hasn’t begun now. For the last six months, which is all of H1FY19, personal loans, which were the major driver for loan growth last year, haven’t seen much momentum,” Hajra said.
He also observed that some of the demand for consumer durable loans is being met by NBFCs now, especially given that banks’ exposure to NBFCs rose 41.5% y-o-y in September. In other words, banks may have yielded a significant share of the unsecured market to NBFCs.
Non-bank entities’ Q2FY19 figures bear this out. For instance, Bajaj Finance, a leading player in consumer durable financing, reported a 44% y-o-y growth in assets under management in the consumer B2C businesses category.
In January 2018, nearly a third of outstanding retail loans in the banking system were unsecured. Outstanding loans to individuals as on January 19 stood at `18.28 lakh crore, of which loans worth Rs 5.62 lakh crore — about 31% — were unsecured.