Retail loans are emerging as a fast-growing segment for banks even as lending to industry and services was sluggish. That is the trend evident from the latest data (July 2012) on sectoral deployment of credit from the Reserve Bank of India.

Retail loans (what RBI terms personal loans) have expanded by 13-15 per cent in each of the last three months beginning May 2012, after slowing since the second half of last fiscal. These loans grew at just 11 per cent in the April 2011-March 2012 duration, tapering down from about 17.5 per cent the preceding year. Outstanding retail loans as of July 2012 stand at Rs 8.05 lakh crore.

This pick-up in growth seems to be driven by banks once again increasing credit card lending and going all out on vehicle loans. Bank credit to the credit cards segment was up by 19 per cent in July over a year ago.

This growth can be partly attributed to a low base. Tightening by banks and prudence on part of borrowers following the 2008-09 economic crisis saw credit card loans shrinking for several months after that. Lending to this segment has picked up in recent months.

Vehicle loans have seen good growth of 20.5 per cent in July despite vehicle sales slowing. This was probably driven by higher demand for larger utility vehicles that run on diesel.

Housing loans (including priority sector) too have seen a pick-up in the last three months.

Banks have, however, been going slow on lending towards education and consumer durables. On consumer durables, high interest rates seem to have deterred customers so much that outstandings have been shrinking. Outstanding consumer durable loans have come down from about Rs 9,800 crore in July 2011 to Rs 6,925 crore now.

Industry affected

Of the four segments that make up non-food credit for banks — agriculture, industry, services and retail loans — loans to both industry and services have lost sheen in recent times.

Loans outstanding to industry, which make up nearly half of total non-food credit, grew only by 17 per cent year on year as of July. This is the lowest growth since December 2009.

Loan repayment problems in some sectors and limited capex in others saw sectors such as metals, mining, cement and infrastructure seeing recording slower growth in credit offtake. Some export-oriented industries such as engineering and chemicals though, witnessed higher growth.

Service sector loans too saw outstandings grow only by 15 per cent in recent months 2012, compared to the 20-24 per cent levels a year ago.

Related Topics
comment COMMENT NOW