Banks are expecting a further push in retail loan demand with the possibility of a rate-cut by the Reserve Bank of India in its policy review scheduled for October 4.

“There has been some traction in the retail segment in the first and second quarters. We are expecting this to grow further in the current festival season, including Diwali and Christmas,” said a senior official of State Bank of India.

Bank credit has grown at a tepid 6.8 per cent during the past one year. In the first six months of this fiscal, it is down to a negative 0.8 per cent. Even as all major sub-segments such as credit to industry, services and agriculture have shown either low or negative growth, personal loans (for housing, auto, education, as well as general) have begun to look up.

Personal loans account for about 22 per cent of the overall bank credit given in the country. And, a major portion of this is given for housing. According to the latest available disaggregated numbers of bank credit up to the end of July 2017, personal loans grew at 15 per cent year-on-year and 3 per cent in the current fiscal.

Top banks have reported similar trends. SBI witnessed strong growth in retail loans in the first quarter ended June 30. Home loans grew at 13.92 per cent in the quarter compared to the same period last year. Auto loans and other retail loans grew 20.1 per cent and 9.66 per cent, respectively.

On the other hand, there was decrease in other corporate loans, especially to sectors such as infrastructure, iron and steel, trade, textiles, and engineering.

Similarly, ICICI Bank’s unsecured credit card and personal loan portfolio grew to ₹23,180 crore, a 39 per cent year-on-year growth in the period ended June 30.

Personal loans is still a small portion of the bank’s overall loan book — just 5 per cent of the loan portfolio of ₹4.6 lakh crore. These loans, according to the bank, are primarily cross-sold to existing customers. This is supposed to be a lot safer than selling loans to outsiders.

According to data, there has been about 50 per cent increase in credit requests for retail loans (both secured and unsecured) now than a year back. Increasing recourse to digital platforms, and ease of obtaining a loan for those who have good credit bureau score are among the factors behind this, Navin Chandani, Business Development Officer, told BusinessLine.

Policy focus

Bankers are hoping that the RBI will cut rates once more in its October 4 policy review. It had cut the repo rate by 25 basis points in the last policy review in August.

A significant dip in GDP growth to 5.7 per cent in the first quarter of the current financial year and subdued retail inflation of 3.36 per cent in August (lower than the 4 per cent target) are expected to strengthen the case for a cut.

Bankers say that a rate-cut is likely to pep up demand for retails loans further, since the busy season for bank credit starts now. The onset of the festival season as well as new harvest is expected to see a pick up in consumer spending.

It has also been observed that rate-cuts are seldom passed on if made in the last quarter of the fiscal.

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