Retail credit, which was until a couple of years ago,
viewed as a big growth driver for banks, has seen steep moderation in the
recent past. Except education loan, all
other retail loan segments witnessed a moderation in growth over the past
year.
Retail credit after expanding by 32% in the 2004-07
period, moderated to an 11% growth for the next two years. The reason for the
slowdown may be attributed to banks’ asset quality concerns rising due to the
economic downturn.
Housing loans constitute almost half of the retail
credit outstanding, with almost 73% of this falling under priority lending –
below Rs.20 lakhs loans. Housing loans grew at just 9% annually during 2007-09,
after a 31% annual growth in the previous 3 years. The subdued growth can be traced
to the disproportionate increase in property prices. Housing credit may pick up
on the rollout of new housing loan schemes and moderating property prices.
Credit card loans and education loans, the two fastest
growing categories, have both increased their share in retail credit in recent
years. Of these, education loans alone continued to grow at a strong pace of
39.2% in 2008-09. Education loans have seen significant demand in the last few
years. Despite its unsecured nature, this portfolio doubled its share in loans
to 5.2% in the latest financial year. Credit cards have seen their share go up
from 2.5% of the retail credit to as much as 4.9%, a pointer to rising income
levels and increased consumption, especially in urban areas and metros.
Loan against fixed deposit is another segment which has
seen a steady 13% growth in the last five years. These loans are given at small
spread over the deposit rate, as the loan is already secured by the deposit.
The consumer durable loans segment is the only segment
which has witnessed decline in outstanding over years. But it is clear that
this trend had little to do with actual sales, as industrial production data
show consumer durable sales expanding over this period.
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