Growth in retail loans tops that of corporate borrowings in November
MUMBAI: Retail loans have grown at more than double the pace than overall loans till the end of last year, and have posted higher growth than loans to corporates, reinforcing the belief that consumer sentiment is stronger than corporate investment outlook.
Retail loan growth in November was at its best ever since the Modi government assumed power in May ’14, partly helped by festive season purchases. An analysis by the Reserve Bank of India data shows that retail loans have grown 18% year-on-year in November compared with 15.8% growth in the same period a year ago, registering one of the highest growth rates in two years.
“The interesting thing is that Indian savers have more confidence in India today than the private Indian producer. That’s an amazing point,” said Uday Kotak, vice-chairman and MD, Kotak Bank. The data suggests that growth is largely driven by a sharp rise in loan against shares (78%), credit card outstandings (28%) and unsecured loans (21%), among others. “From a macro perspective, this reflects consumption and lifestyle trends. Key spend themes are travel, dining, shopping, particularly consumer durables,” said Shanti Ekambaram, president, consumer banking, Kotak Mahindra Bank. “Loss rates in credit cards and unsecured loans in the past few years have been low due to effective use of credit bureaus and a stable job environment.” Besides, there’s more demand for consumer products from online channels which are fast picking up. Unsecured retail loans consist of personal loans to salaried individuals and small business loans. “The growth is mainly coming from the salaried sector because of the overall stability of jobs seen recently,” said Ekambaram.
Major risks, however, could be linked to poor credit underwriting and economic growth trends, particularly job stability and security.
Read full article: Economic Times
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