Home / Industry / Banking /  Lenders to focus on corporates as retail loans expected to drop

MUMBAI : Indian lenders, which have been focusing on retail loans for several years, could now start extending corporate credit, at least in the near term, as the economy tries to recover from the covid-19 shock, experts said.

Companies will need working capital to tide over the after-effects of the disruption when they start production after the lockdown, said the experts. Demand for capital expenditure is not expected to revive anytime soon, but working capital loans will still be needed, they said.

Retail loans are not expected to pick up immediately as consumer demand could a take a while to overcome the covid-19 effect, said Pallav Mohapatra, chief executive of Central Bank of India. “If new properties do not come up for sale for some time after the lockdown, there may be limited demand for home loans. There may be some takeover of loans, but little growth because of supply-side issues immediately after the lockdown," he said.

However, there will definitely be demand for corporate loans, said Mohapatra. Retail demand will pick up gradually, but it will be preceded by corporate demand.

“Once businesses start functioning and employees start receiving regular remunerations, they will see a restoration of their purchasing power. This will lead to a rise in retail demand for loans at a later stage," he said.

Retail loan growth will also be subdued for some time because of the recent spate of job losses and a sense of uncertainty among consumers, experts said.

Some banks are already seeing higher growth in their corporate book, as compared to their retail loan book.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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