Defying inflationary concerns and interest rate hike, the demand for retail loans remains strong as per the data of major private banks pertaining to the first quarter of the current financial year. The strong demand for retail loans is a significant indicator of economic activity at a time when the Reserve Bank pressured a pause button on the accommodative stance in its monetary policy.  

The RBI raised the policy rate by 90 basis points in the quarter taking the repo rate to 4.9 and indicated its intention to remain focused on withdrawal of accommodation in a calibrated fashion to ensure inflation remains within the limits. Many banks have responded with corresponding increases in lending rates and any analysis of the demand for loans needs to factor this increase in rates. 

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The major private banks, including HDFC Bank, ICICI Bank and Axis Bank reported robust growth in retail advances in the first quarter of FY 2022-23. 

HDFC Bank’s retail advances growth continued during the quarter as well. Retail advances grew 21.7 per cent year-on-year and 4.9 per cent quarter-on-quarter. Excluding auto and two wheeler loans, which face supply chain disruptions during the quarter, the year-on-year retail growth excluding these two was 25 per cent. As per the loan mix data of HDFC Bank, retail loans constitute 39 per cent of its total loan book as on June 30, 2022. 

According to Srinivasan V, Chief Financial Officer, HDFC Bank, the current environment is still positive for retail loan growth. “We do see good demand across most of the products from unsecured products to secured products to mortgage products to home loans and across everywhere we do see that including the gold loan and so on,’‘ he said.

Anindya Banerjee, CFO, ICICI Bank, said the general loan growth across the sectors for ICICI Bank and its peer banks (who have reported), has “held up quite well’‘ although rates have started moving up from late May. “There seems to be a fair degree of resilience in demand in typical segments in which banks like us operate. However, we will have to monitor this as we go along,’‘ he added.

For ICICI Bank, retail loans grew by 24.4 per cent in the third quarter ended June 2022, compared with the same period last year. 

For Axis Bank too, retail loans grew 25 per cent in the first quarter and its retail portfolio now constitutes 59 per cent of overall loan book. 

It remains to been seen if this demand will sustain if there is any further rise in key policy rates by RBI in the ensuing policy review.