Drop in housing loans slows retail credit growth
The Hindu Business Line, August 31, 2009, Page 1
Education loans’ share rises.
M.V.S. Santosh Kumar
Retail credit, which was until a couple of years ago, viewed as a big growth driver for banks, has seen steep moderation in the recent past, data from the RBI Annual Report released this week show.
Data show that the proportion of retail loans to total non-food credit actually fell from 24.5 per cent to 21.6 per cent between 2004-05 and 2008-09. Except for education loans, all other retail loan segments witnessed a moderation in growth over the past year.
Retail credit after expanding by 32 per cent in the 2004-07 period, moderated to an 11 per cent growth for the next two years. The reason for the slowdown may be attributed to banks’ asset quality concerns rising due to the economic downturn. Retail credit offtake too slowed.
Housing proportion falls
Housing loans, the dominant category of retail loans, grew at just 9 per cent annually during 2007-09, after a 31 per cent annual growth in the previous 3 years. Housing loans constitute almost half of the retail credit outstandings, with almost 73 per cent of this falling under priority lending – below Rs 20 lakh loans.
The subdued growth can be traced to the disproportionate increase in property prices and rising interest rates until recently.
Housing loans saw their share in the retail loan pie fall from 52.2 per cent in 2004-05 to 49.4 per cent as of May 22, 2009. However, housing credit may pick up on the rollout of new housing loan schemes and moderating property prices.
Credit card loans and education loans, the two fastest growing categories, have both increased their share in retail credit in recent years.
Of these, education loans alone continued to grow at a strong pace of 39.2 per cent in 2008-09.
Credit card loans, which managed to expand at a swift pace until 2007-08 saw growth drop to 6.1 per cent in 2008-09.
Credit cards have seen their share go up from 2.5 per cent of the retail credit to as much as 4.9 per cent, a pointer to rising income levels and increased consumption, especially in urban areas and metros. Education loans have seen significant demand in the last few years. Despite its unsecured nature, this portfolio doubled its share in loans to 5.2 per cent in the latest financial year. Loan against fixed deposit is another segment which has seen a steady 13 per cent growth in the last five years.
These loans are given at small spread over the deposit rate, as the loan is already secured by the deposit. The consumer durable loans segment is the only segment which has witnessed decline in outstandings over years.
But it is clear that this trend had little to do with actual sales, as industrial production data show consumer durable sales expanding over this period.
The Hindu Business Line, August 31, 2009, Page 1
Education loans’ share rises.
M.V.S. Santosh Kumar
Retail credit, which was until a couple of years ago, viewed as a big growth driver for banks, has seen steep moderation in the recent past, data from the RBI Annual Report released this week show.
Data show that the proportion of retail loans to total non-food credit actually fell from 24.5 per cent to 21.6 per cent between 2004-05 and 2008-09. Except for education loans, all other retail loan segments witnessed a moderation in growth over the past year.
Retail credit after expanding by 32 per cent in the 2004-07 period, moderated to an 11 per cent growth for the next two years. The reason for the slowdown may be attributed to banks’ asset quality concerns rising due to the economic downturn. Retail credit offtake too slowed.
Housing proportion falls
Housing loans, the dominant category of retail loans, grew at just 9 per cent annually during 2007-09, after a 31 per cent annual growth in the previous 3 years. Housing loans constitute almost half of the retail credit outstandings, with almost 73 per cent of this falling under priority lending – below Rs 20 lakh loans.
The subdued growth can be traced to the disproportionate increase in property prices and rising interest rates until recently.
Housing loans saw their share in the retail loan pie fall from 52.2 per cent in 2004-05 to 49.4 per cent as of May 22, 2009. However, housing credit may pick up on the rollout of new housing loan schemes and moderating property prices.
Credit card loans and education loans, the two fastest growing categories, have both increased their share in retail credit in recent years.
Of these, education loans alone continued to grow at a strong pace of 39.2 per cent in 2008-09.
Credit card loans, which managed to expand at a swift pace until 2007-08 saw growth drop to 6.1 per cent in 2008-09.
Credit cards have seen their share go up from 2.5 per cent of the retail credit to as much as 4.9 per cent, a pointer to rising income levels and increased consumption, especially in urban areas and metros. Education loans have seen significant demand in the last few years. Despite its unsecured nature, this portfolio doubled its share in loans to 5.2 per cent in the latest financial year. Loan against fixed deposit is another segment which has seen a steady 13 per cent growth in the last five years.
These loans are given at small spread over the deposit rate, as the loan is already secured by the deposit. The consumer durable loans segment is the only segment which has witnessed decline in outstandings over years.
But it is clear that this trend had little to do with actual sales, as industrial production data show consumer durable sales expanding over this period.
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