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For banks, the buzzword in business is retail loans now. In view of increasing non-performing assets (NPAs) and scams, many have hit the pause button in the corporate loans segment and are focussing on retail portfolio.
The net interest margin (NIM) of many banks is now significantly dependent on retail loans or personal segment loans in view of substantial growth in business. On an average, banks have witnessed a noticeable growth, ranging from 10 to 28 per cent, in the retail loan segment in the third quarter ended December 31, 2017.
For State Bank of India, there was “robust” growth in the personal loan segment in the third quarter. While home loans went up by 13.56 per cent, auto loans and other personal loans grew 18.08 per cent and 11.88 per cent, respectively.
The corporate credit growth, however, has been muted.
This was, according to SBI, due to, among others, a “strategy to grow in better-rated corporates, restricting growth in stressed sectors, and movement of exposure from loan book to investment book.”
The same is the case with many other banks. HDFC Bank had seen 28.7 per cent growth in retail loans which was driven by auto, personal and home loans.
For ICICI Bank, retail loan growth was 22 per cent in the third quarter. While responding to a query in the recent earnings call, its Managing Director and CEO, Chanda Kochhar, said: “Our retail portfolio is definitely growing faster than the corporate portfolio,” adding that the proportion will go up though there was no move to get to a target proportion.
The relative safety and low NPAs in the retail segment, a complete use of credit bureau data to identify disciplined customers, cross-selling of products to existing customers, and focus on in-house customers for marketing loans are driving the growth in retail loans.
The general economic trends and projected growth in GDP to over 7 per cent and low inflation figures may further drive aggregate demand for retail loans.
From the customers’ point of view, all this augurs well. If an applicant has a Cibil credit score of over 750, banks such as HDFC promise quick processing of loans.
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