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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