BackLenders spot green shoots in retail credit as businesses reopen
RBI data shows that between 27 March and 8 May, total outstanding non-food credit shrank by ₹1.36 tn, or about 1.32%
PremiumRetail loan demand snuffed out by the coronavirus lockdown is beginning to show signs of life with bankers reporting loan applications and disbursals in areas where curbs have been eased.
Housing Development Finance Corp. Ltd (HDFC) said it is seeing home loan disbursements rising by the day, although the figures are not comparable to the previous year. The mortgage lender has spotted the trend across cities, barring Mumbai and Delhi, the two big markets where restrictions continue.
“We have started seeing a little bit of traction. Old customers have approached for disbursement of sanctioned loans and some who had applied during the lockdown have also started getting (loans) disbursed wherever registration has opened up," said Renu Karnad, vice-chairman and chief executive officer of HDFC. “There is a lot of interest also in cities like Bangalore and Hyderabad, as we see more people start filling up applications especially in the middle income and affordable housing segments," she added.
State-run Union Bank of India said it has started seeing an increase in demand for top-up loans from existing home loan borrowers, as they use these funds for consumption purposes.
“We have seen a pick-up in documentation and disbursement of pre-approved loans for top-up loans on existing housing loans and micro, small and medium enterprises (MSME) loans. These loans are capped at ₹5 lakh payable at an interest rate of 8-9%," said Rajkiran Rao, chief executive and managing director.
State Bank of India, the country’s largest lender, said it has witnessed a jump in pre-approved personal loans in April and May. These are loans given to salaried customers through the bank’s mobile app Yono.
According to a senior bank official, the pickup in personal loans has been better than in the previous financial year. “Everybody wants to get some liquidity. These are loans given to salaried customers where there is some kind of understanding with employers and some clarity of salary over the last six months," he said.
IDFC First Bank, where consumer loans make up nearly 17.5% of total loan book, has reported a pickup in loans. “April was not a good month in terms of credit growth due to lockdown. After the recent lifting of lockdown in some states, we were pleasantly surprised to see consumption coming back. When the lockdown was lifted, there was demand for consumption items and durables," said V. Vaidyanathan, chief executive officer and managing director of IDFC First Bank.
Reserve Bank of India data shows that in the 27 March-8 May period, total outstanding non-food credit shrank by ₹1.36 trillion, or 1.32%, to ₹101.83 trillion. The country has been under a stringent lockdown since 25 March to limit the spread of covid-19, bringing economic activity to a standstill.
While the initial phases of the lockdown witnessed a complete shutdown of businesses, the government has gradually lifted curbs in green and orange zones, areas that have little or no coronavirus cases, and subsequently even in red zones in the fourth phase of the lockdown.
Business is picking up in some orange and green zones. Bankers noted that consumption beyond essentials is also picking up for online marketplaces such as Amazon and Flipkart.
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