Home / Industry / Banking /  Retail loans hit a festive high in September

MUMBAI : Retail loan growth surged 20% in September, the fastest since the covid-19 outbreak in 2020, unfazed by higher borrowing costs, signalling a robust revival in consumer demand during the festive season.

Loan demand was seen across categories for purchases of vehicles, consumer durables and homes, the mainstay of retail credit.

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Home loans, which account for nearly half of all retail loans, grew 16% to 18.05 trillion between 24 September 2021 and 23 September 2022, data released by the Reserve Bank of India showed.

The other personal loans category, which accounts for 26% of aggregate bank loans to individuals, grew an even faster 24.4% to 9.73 trillion as of 23 September.

The personal loans category mainly includes credit for domestic consumption, medical expenses, travel, marriage, other social ceremonies, and loans for debt repayment.

Growth in all sub-segments took total retail loans to over 37 trillion at the end of September.

“As per the high-frequency indicators (HFIs) for the recent months, private consumption—especially urban demand—has remained healthy," RBI governor Shaktikanta Das said on Wednesday at a conference organized by lobby groups Ficci and the Indian Banks’ Association.

The contact-intensive services have continued to make a smart rebound, aided by the unfettered resumption of activities and full-fledged celebration of festivals after two-and-a-half years, Das said.

“You see a huge amount of participation. We all saw it during the Ganpati festival in Maharashtra and other places and Diwali. As the data is trickling in, we find that retail sales of various white goods and other fast-moving consumer goods have improved considerably," he said.

RBI data showed that consumer durables loans grew 60.7% in September from a year earlier.

Bankers said they witnessed consumer demand across segments during the festive season as India geared up for full-fledged celebration after two years of muted festivities. Demand for vehicle loans also rebounded in September amid an 11% increase in sales.

“Not just housing, this time around, there is demand for consumer durables as well as vehicle loans," said the head of retail credit at a public sector bank, requesting anonymity.

He added that while the asset quality of the retail sector is healthy at the moment, the sector needs constant attention to ensure people repay on time.

Mint reported on 24 October that for 13 banks that declared their quarterly earnings till then, covid-19 recast loans worth 10,019 crore—primarily to individuals—have turned sour in the six months to 30 September.

In a 31 October note, analysts at ICICI Securities said that overall retail credit growth momentum is continuing.

Of the monthly incremental retail credit accretion of 54,100 crore in September, 37% was accounted for by housing loans, 9% by vehicle loans, 4% by education loans, 7% were advances against fixed deposits, and 38% towards other retail loans.

“Over the past 12 months, retail loans saw annual accretion of 6.1 trillion, of which 41% was towards housing, which is lower than its proportion of 49% in the total retail book," the ICICI Securities report said.

Others said that the recent sectoral credit deployment data showed that the spate of recent repo rate hikes has failed to dent demand.

“While a low base can be a part of the reason, credit growth seems solid this year in the first six months. The other key reasons are a return to pre-pandemic conditions and a revival in demand. As our domestic demand is expected to remain fairly insulated from global growth slowdown, and with the onset of the festive season (October to December), we believe credit demand to remain steady in the second half as well," said Sonal Badhan, economist, Bank of Baroda.

Badhan cautioned that downside risks could emerge from the impact on export demand if major economies enter into a recession.


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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