The Hindu Business Line : The sum & substance of personal loans

THE number of personal loan accounts with scheduled commercial banks (SCBs) in India went up by almost 50 per cent between March 1997 and March 2002, as per CMIE data. Personal loans outstanding, however, went up by more than 130 per cent. The result was that the average personal loan outstanding increased from Rs 24,668 in 1997 to Rs 47,000 in 2002.

This doubling of personal loan outstandings, at current prices, was accompanied by a significant shift in the use to which these loans were put.

Housing loans, which accounted for about 28 per cent of personal loans outstanding in 1997, went up to 40 per cent in 2002. This was offset by a decline of `other loans' from 68 per cent to 56 per cent of total personal loans over the period. It should, however, be noted that despite this decline `other personal loans' still accounted for more than half of total personal loans outstanding. The total of `other loans' outstanding shot up from Rs 19,282 crore in 1997 to Rs 46,478 crore in 2002. An increase of more than 141 per cent!

The per cent of personal loans used for the purchase of consumer durables was about the same at the beginning and end of this period. It remained roughly constant, 3.5 per cent in 1997; and 3.9 per cent in 2002. This seems surprising at first sight, but one must bear in mind the 130 per cent rise in total personal loans outstanding over the period.

Furthermore, for reasons that are not immediately apparent, the percentage of personal loans outstanding in the consumer durables category, rose steadily in the intervening period, before coming down again in the very last year. The percentage of consumer durable loans outstanding to total personal loans rose to 3.8 per cent in March 1998, and then to 4.8 per cent and 5.4 per cent in 1999 and 2000, respectively. After that, it fell slightly to 5.3 per cent in 2001, before `bottoming out' in 2002.

In absolute terms, total outstanding loans for consumer durables more than trebled between 1997 and 2002, from Rs 974 crore to Rs 3,200 crore. Meanwhile, housing loans outstanding went up from about Rs 8,000 crore in 1997 to Rs 33,000 crore in 2002; a more than four-fold increase.

Another interesting point is that the broadening of the `base' for consumer durables was much lower than for housing loans. The number of accounts in the consumer durables sector went up by less than 50 per cent between 1997 and 2002; from 11.4 million accounts to 17.6 million. While the number of housing loan accounts shot up from 1 million to 1.8 million; an increase of more than 80 per cent. Meanwhile, the number of `other personal loan' accounts increased from a little over 9.6 million to almost 14.6 million; an increase of more than 50 per cent.

Presumably the `other personal loans' category is comprised mostly of personal loans to individuals against gold, shares, securities, hypothecation (of old cars) and mortgages (of old houses). Data on credit card outstandings are probably not included, given that there is no evidence that anyone, either in the RBI or in the Ministry of Finance, keeps track of credit cards. This, if true, is surprising news since credit cards account for a large and rapidly growing share of `money supply,' which the RBI closely monitors in order to keep inflationary pressures in check.

Total personal loans outstanding increased from Rs 28,000 crore in 1997 to more than Rs 82,000 crore in 2002. On account of these personal loans, as distinct from loans to agriculture, trade, and industry, shot up from a little more than 20 per cent in 1997 to over 31.2 per cent in 2002. And that too over a period when total SCB outstandings shot up from Rs 284,000 crore to Rs 656,000 crore; an increase of more than 130 per cent.

More Stories on : Credit Market | Trends | Consumer Finance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Top priority to taming inflation, says PM

Settlement of 400 tax arrears cases to be expedited

Mixed response to strike — AIMTC rebuts Govt claims

Govt may allow bidding for coal mining blocks

Sun Pharma in patent infringement case

The sum & substance of personal loans