Slowdown no deterrent, retail loans on the rise

An economic slowdown didn’t stop Indian households from borrowing more last financial year to fund their property, vehicle and credit card purchases compared with the same period a year ago.

This is what data from the RBI on the sectoral deployment of credit for the latest fiscal show.

According to the latest data, retail credit card outstandings grew by nearly 24 per cent in 2012-13, doubling from 11 per cent last year. Auto loans were up by 21 per cent, up from 18 per cent. Housing loans also saw faster growth at 14 per cent from 11 per cent in 2011-12. Interestingly, consumer durable loans shrank, reflecting sluggish sales in the segment. All these segments outpaced the overall growth in banks’ lending that slowed to 14.4 per cent in the year ended February 2013, against 15.4 per cent last year.

Industry in a crunch

While retail borrowers took more loans, industry cut back. Credit to industry rose only by 14.7 per cent against 19 per cent the previous year.

Mid-sized businesses bore the brunt of this, with credit to them shrinking by a tenth.

Notably, this very segment grew faster than the overall loan growth, for the past two years. The services industry, too, was not buoyant, with credit to the sector growing at 12.7 per cent against 14.7 per cent achieved in 2011-12. Within the services space, credit to shipping shrank by almost a third. Retail trade was the most buoyant segment within services, with a growth of about 30 per cent.

Agriculture was another sector that sprang a surprise. Despite poor production and a dodgy monsoon, agriculture loans grew 18.4 per cent in February, doubling from last year. That should augur well for banks’ priority sector loans, which have been below targets. But it may aggravate bad loan problems.

NBFC loans slow

Bank credit to non-banking financial companies (NBFCs), a point of concern for RBI, slowed during the fiscal.

Credit to this sector that expanded by 40 per cent in 2010-11 decelerated to 17 per centin 2012-13.

The apex bank’s move to exclude bank loans to certain NBFCs from the priority sector category from April 2011 and its move to bar securitisation of certain loans curtailed lending to them.

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