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On an absolute basis, outstanding credit has grown  ₹5,804 crore. (Photo: Bloomberg)
On an absolute basis, outstanding credit has grown 5,804 crore. (Photo: Bloomberg)

Retail loans pull credit growth back from brink

  • Festive demand for such loans helped non-food credit grow year-to-date in FY21
  • In the fortnight ended 6 November, outstanding non-food credit stood at 103.2 trillion

MUMBAI : Outstanding non-food credit grew for the first time on a year-to-date basis in FY21, aided by the demand for retail loans during the festive season, according to data released by the Reserve Bank of India (RBI).

In the fortnight ended 6 November, outstanding non-food credit stood at 103.2 trillion, slightly more than 103.1 trillion reported by banks as on 27 March. On an absolute basis, outstanding credit has grown 5,804 crore. Credit data is released by the central bank every fortnight, with details on outstanding bank loans, net of repayments made by borrowers.

Credit growth is still languishing in the 5-6% range on a year-on-year (y-o-y) basis, but the festive season offered some respite when people spent more than earlier, bankers said.

Mortgage loans, they said, is one of the prime growth categories this time with borrowers taking advantage of significantly low interest rates.

Credit growth stood at 5.7% y-o-y on 6 November, a little higher than the 5.1% reported in the last fortnight, the data showed.

“Banks are coming up with various festival offers to push retail credit. State Bank of India (SBI) in October 2020 announced festive season interest rate concession up to 25 bps on home loans," Care Ratings said in a report on 21 November. Credit growth stood at 8.9% in the same period last year, it pointed out.

Interest rates on home loans are at decadal lows at present.

Several lenders are offering mortgage loans below 7%, with the aim of boosting consumer sentiment after the dip in spending brought about by the covid-19 pandemic. SBI saw its retail personal loans, which constitute 38.1% of its portfolio, grow 14.55% in the September quarter to 7.85 trillion, aiding the bank’s 52% y-o-y jump in Q2 net profit.

The state-run lender has seen its home loan sanctions rise 29% y-o-y, though disbursement, which usually comes with a lag, was up 12% y-o-y. Growth in retail lending was broad-based, including auto loans, where sanctions grew 29%. Subsequent disbursements increased 27% from the same period last year.

“We hope that our retail engine will keep on performing as strongly as it has," Dinesh Khara, chairman, SBI, told analysts on 4 November.

ICICI Bank recently said its mortgage loan portfolio has crossed 2 trillion.

“I would reckon that it is almost lifetime high retail asset disbursements that we had on the back of very solid mortgages, very solid secured business loans, very solid small and medium enterprise (SMEs), very solid high-quality clients where we are able to see credit summations that have surpassed pre-covid levels," Anup Bagchi, executive director, ICICI Bank told analysts on 31 October.

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