Retail loans take lead as corporate demand slips

Retail loans take lead as corporate demand slips

retail loan 1
  • Banks are not vigorously pushing the Retail Credit. The total borrowings by individuals have overtaken the loans to businesses for the first time as banks aggressively push retail credit to make up for the lacklustre demand from companies.
  • Outstanding retail loans stood at ₹28.58 trillion as of 30 July, while loans to industries stood at ₹28.24 trillion, the Reserve Bank of India (RBI) data showed.
  • Hitherto we observe that corporate loans had always exceeded retail credit until now. However, companies have shown little interest for loans over the past year, and individuals have borrowed heavily to benefit from the low interest rates.
  • Loans to companies have remained docile for some time and grew 1% from a year ago as of 30 July and among large businesses loans have shrunk the most at 2.9%.
  • In contrast, retail loans outstanding have grown 11.2% from a year earlier as of 30 July, with borrowers choosing to pawn gold jewellery and take personal loans.
  • Credit against the yellow metal rose 77.4%, albeit on a low base, to ₹62,412 crore as of 30 July, RBI data showed. Meanwhile, corporates continue to deleverage and explore alternative funding routes. While capacity utilization at factories is improving, they are yet to reach pre-covid levels and, therefore, credit demand is low, a senior banker said on condition of anonymity.
  • According to Care Ratings, overall credit growth is expected to be in the range of 7.5% to 8% in FY22, with a low base effect, economic expansion, ECLGS or sovereign guaranteed loan support, and retail credit push.

Bankers believe that as the economy recovers from the shock of the second covid-19 wave, the September and December quarters would see better corporate credit growth and have lined up pipelines of sanctioned loans for corporate borrowers, which will be drawn based on the pace of demand recovery.


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