RETAIL CREDIT GROWTH

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. Except education loan, all other
retail loan segments witnessed a moderation in growth over the past year.
Retail credit after expanding by 32% in the 2004-07 Period, moderated to an 11%
growth for the e t two ears. The reaso for the slowdow
a be attributed to ba ks
asset quality concerns rising due to the economic downturn.
Housing loans constitute almost half of the retail credit outstanding, with almost 73% of
this falling under priority lending below Rs.20 lakhs loans. Housing loans grew at just
9% annually during 2007-09, after a 31% annual growth in the previous 3 years. The
subdued growth can be traced to the disproportionate increase in property prices.
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% in 2008-09. 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% in the latest financial year. Credit cards have seen
their share go up from 2.5% of the retail credit to as much as 4.9%, a pointer to rising
income levels and increased consumption, especially in urban areas and metros.
Loan against fixed deposit is another segment which has seen a steady 13% 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 outstanding 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.