Money & Banking

Why South tops in personal loans

K Ram Kumar Mumbai | Updated on March 10, 2018


Urbanisation, IT boom driving home ownership, consumer demand

Borrowers from South India seem to be more ready to opt for personal loans as compared with those from the rest of the country, going by Reserve Bank of India data. 

The Southern region accounts for about a fifth of the country’s population –– and over a third (38.45 per cent) of the total personal loans given by scheduled commercial banks in 2015, according to central bank data.

The Southern region comprises five States (Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Telangana) and two Union Territories (Lakshadweep and Puducherry). Among the six geographical regions, banks had the highest exposure to personal loans in this region.  Also, year-on-year, the Southern region reported higher growth in personal loans at 13.66 per cent in 2015, against 9.6 per cent in the previous year. This growth comes on a relatively higher base. 

Key factors

The RBI defines personal loans as loans given for housing, education, vehicles, consumer durables, credit card outstanding, and advances against FDs and shares.

Among the reasons for the higher demand for this category of loans in the Southern region (and, to an extent, Maharashtra) are the relatively higher economic activity, rapid urbanisation, and more awareness about loan products, say bankers.  Madan Sabnavis, Chief Economist, CARE Ratings, reasoned that the boom in information technology in the South, especially in Bengaluru and Hyderabad, has contributed to a robust demand for home loans. Further, due to the concentration of the corporate sector in Maharashtra, especially Mumbai, there has been a sustained demand for personal loans from high-income earners.

As of March-end 2015, banks’ personal loan portfolio was up 12.47 per cent to ₹11,44,000 crore from ₹10,17,100 crore a year earlier. 

Maharashtra tops

Banks had the second-highest personal loan exposure (at 23.6 per cent of the total personal loans) to the Western region, comprising three States (Goa, Gujarat, Maharashtra) and two Union Territories (Dadra & Nagar Haveli and Daman & Diu).  

Among the 29 States and seven Union Territories, banks had the single largest exposure in personal loans to Maharashtra (₹2,01,300 crore in 2015), followed by Tamil Nadu (₹1,28,000 crore), Karnataka (₹1,20,900 crore) and Andhra Pradesh (₹1,20,300 crore, including data relating to Telangana). 

Published on July 07, 2016

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