Retail Loans Grow 16% ; RBI Cautions Banks Of Herd Movement
Retail loans in India are performing better than the total loans growth in the country, say the data released by the Reserve Bank of India (RBI). Retail loans in the country witnessed a 16 per cent growth during the financial year 2013 (FY13) and the financial year 2017 (FY17). However, total loan growth in the country stood at nine per cent during the same period.
The RBI data show that nearly half of the retail loans disbursed during FY13 and FY17 were home loans, followed by auto loans that accounted for 11 per cent and 4.6 per cent of education loans.
Better incomes trigger home purchase
So, what makes home loans popular? According to the RBI data, the rising income levels has been one of the key reasons for the growth of retail loans. Better incomes have triggered consumers into buying homes, automobiles and better education facilities for their children.
People tend to be aspirational and invest in a property at a time they think they can afford a downpayment and a monthly outgo of a certain amount.
These home loan seekers are a mix of self-employed and service sector-employed population. In a recent report by rating agency Crisil, interestingly, the number of self-employed taking home loans rose in FY18. Home loans to self-employed accounted for 30 per cent of the total home loans disbursed during FY 18 as against 20 per cent in the previous fiscal.
States that take the lead
Of the many states across the country, the west of India emerged as the clear winner when it came to retail loans. According to RBI, Maharashtra and Gujarat were the top runners in the disbursement of retail loans in the country.
Of the two, Maharashtra led with a share of 18.9 per cent in FY17, up from 17.1 per cent in FY13. On the other hand, Gujarat’s share rose to six per cent up in the same period, up from one per cent in FY13. The average growth registered in the two states was 16.9 per cent and 22.8 per cent, respectively, between FY13 and FY17. This was followed by the southern states of Tamil Nadu and Kerala. The numbers recorded were 12.1 per cent and 10.5 per cent, respectively.
The disbursement of retail loans in Gujarat on the whole has risen. However, housing loans in specific, according to a report by the State Level Bankers Committee (SLBC) for the third quarter of fiscal 2017-18, showed a slow down of 29.7 per cent compared to 55.72 per cent in FY17. The numbers for the actual amount disbursed also dropped from 101.08 per cent to 51.28 per cent during the same period. The slowdown was attributed to the combined effect of the introduction of demonetisation, the real estate law and the Goods and Services Tax.
RBI warns of herd movement
While the numbers look positive the RBI has cautioned banks against the sudden growth of retail loans, saying it appears to be a herd movement among bankers to grow retail credit and the personal loan segment in view of the problem-riddled corporate loan book. Banks have piled into the retail segment as delinquency is much lower as compared to the corporate segment. According to the RBI’s financial stability report, the gross non-performing advances (GNPAs) ratio for housing finance assets remained flat at 1.55 per cent in September 2017.