Retail lending rebounded strongly in 2022, even surpassing pre-Covid levels. For instance, as much as 34 lakh home loans, totaling Rs 9 lakh crore, were disbursed during the year ending December 2022, of which less than Rs 25 lakh ticket size category accounted for the maximum number of disbursals, reveals a study on retail loans by Equifax and Andromeda.

Banks, housing finance companies, and other institutions provided home loans worth Rs 9 lakh crore during the January 2022 and December 2022 period, registering an annual growth of 18 per cent. The number of loans given too was up by 17 per cent during calendar year 2022.

Overall portfolio outstanding of home loans grew by 16 per cent from December 2021 to December 2022, stated the study titled ‘Indian Retail Loans Overview-April 2023’.

It further revealed that the personal loan segment registered an impressive growth of 57 per cent during 2022. The market size of the retail industry reached Rs 100 lakh crore by December 2022.

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Among the different loan segments, on December 31, 2022, the retail industry reported 54 crore active loans. Furthermore, as on December 31, 2022, there were 6.5 crore active consumer durable loans, registering an annual growth of 48 per cent over the last year.

Commenting on the growth witnessed by the home loan segment, V Swaminathan, Executive Chairman − Andromeda Sales and Distributions Pvt Ltd, said, “Be it public sector banks, private sector banks or housing finance companies (HFCs), all are witnessing healthy growth in home loan business.”

While the loans in the 0-25 lakh ticket size category accounted for the 67 per cent of disbursals, the disbursals increased by 36 per cent in the Rs 75 lakh- Rs 1 crore ticket size category in January-December 2022 compared to the preceding year. In 2021, the growth in the Rs 0-25 lakh category was also 67 per cent over the year 2020.

The study shows that out of the overall portfolio outstanding of home loan, which grew by 16 per cent from December 2021 to December 2022, the private sector banks witnessed growth of 20 per cent from December 2021 to December 2022 — Rs 5 lakh crore portfolio outstanding at the end of December 2022.

Observing that retail lending was badly affected during the pandemic, the report said, “It has bounced back by registering 40 per cent annual growth from January 2022 to December 2022 over January 2021 to December 2021. Retail lenders disbursed 31 crore loans from January 2022 to December 2022.”

Personal loans witnessed a growth of 32 per cent from December 2020 to December 2021 and 57 per cent from December 2021 to December 2022.

Swaminathan said, “The rise in demand for personal loans in India can be attributed to multiple factors such as the growing consumption-driven demand, the ease of availing loans and the competitive landscape among lenders. Despite the recent RBI policy rate hikes, personal loan interest rates have not seen a similar increase compared to home loan rates.”

However, he added, borrowers must exercise caution while availing personal loans, keeping in mind their repayment capacity and avoiding the pitfalls of debt traps.

K M Nanaiah, Managing Director, Equifax Credit Information Services Pvt Ltd and Country Leader – India & MEA, Equifax, said. “The insights presented in our report will prove to be immensely beneficial for lenders as they aim to uphold high underwriting standards, manage risks prudently and increase operational efficiencies. Furthermore, the report will enable lenders to navigate the new high growth environment effectively by leveraging the knowledge gained from the pandemic”.

The contribution to retail loan disbursement was highest by the public sector banks and the private sector banks. However, the Non-Banking Financial Companies (NBFCs) witnessed a growth of 78 per cent during January 2021 to December 2021 compared to January 2020 to December 2020. The private sector banks recorded a growth of 24 per cent on an annual basis.

“NBFCs play a major role in the country’s financial system dominated by public and private sector banks. NBFCs are helping the much-required credit reach in every part of the country,” Swaminathan said.

Besides a large number of branches, NBFCs are heavily deploying digital infrastructure and using App-based technology for loan disbursals.