Declining disbursements: Retail loan growth slows to 16.9% in May

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Published: July 2, 2019 2:13:29 AM

Education loans also saw a 2.5% y-o-y fall in disbursements, whereas, the outstanding on credit cards grew the most —26.1% y-o-y — among all categories of loans to individuals.

Retail loan, Retail loan growth, reserve bank of india, retail segment, housing loansLoans to industry been growing consistently since February 2017, when it showed a contraction of 5.2% over the previous year. (Reuters)

Retail loan growth for banks slowed to 16.9% year-on-year (y-o-y) in May from 18.6% a year ago, according to data released by the Reserve Bank of India (RBI). This is despite an increased focus on the retail segment. The pace of growth of retail loans has been slowing for about a year now. However, housing loans grew a brisk 18.7% y-o-y in May possibly due to the several schemes rolled out by the government in both urban and rural India.

Among the segments that have seen slower disbursements are consumer durables for which credit contracted 69.8% y-o-y. According to analysts at Care Ratings, the contraction in consumer durable loans can be attributed to the drop in purchasing power as the increase in outflow of cash for servicing of home loans is leading to lesser disposable income in hands of consumers for spending on other items.

Education loans also saw a 2.5% y-o-y fall in disbursements, whereas, the outstanding on credit cards grew the most —26.1% y-o-y — among all categories of loans to individuals. Vehicle loan growth slowed to 5.7% y-o-y from 10.4% last year led by slowing domestic sales of both two-wheelers and passenger cars. Credit growth in other segments such as loans against fixed deposits and loans to individuals against shares and bonds moderated to 5.1% and 1.3% y-o-y, respectively. However, when asked about their plans for FY19, bankers said they are focusing more on retail loan expansion. HDFC Bank management said, “We are focusing on innovation and differentiation in retail segment by bringing facilities like 10-second personal loan and loans against mutual funds.” Almost all the big lenders like SBI and HDFC Bank are focusing on their retail loan books expansion to raise their profits.

In order to expand retail loan book, Rakesh Sharma, MD & CEO, IDBI Bank, on analysts call said, “the bank will offer retail loan at a discount to LIC policy holders-10 bps lower for home loans and to LIC agents, education loans and home loans would be 50 bps and 15 bps cheaper, respectively”.

Meanwhile, credit growth to industry rose a sharp 6.4% y-o-y to Rs 28.14 lakh crore compared to a growth of 1.4% y-o-y in May 2018. Loans to industry been growing consistently since February 2017, when it showed a contraction of 5.2% over the previous year. Outstanding loans to large corporates and micro/small industry grew 7.4% and 1.1% y-o-y, respectively, in May. Loans in medium segment decelerated to 3% y-o-y compared to the growth in May 2018.

Non-food bank credit grew 11.4% y-o-y to Rs 84.51 lakh crore in May 2019 compared to 11.1% in May 2018. Credit growth to infrastructure, chemical & chemical products, vehicles, vehicle parts & transport equipment and all engineering accelerated. However, credit growth to basic metal & metal products, textiles, food processing and petroleum, coal products & nuclear fuels decelerated/contracted.

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