For banks, an encore on retail loans is a tough act this fiscal

With high interest rates starting to turn away retail customers, banks are expecting lower growth in the retail segment this fiscal, especially in housing and auto loans.

“The banking industry will not able to sustain last year’s growth in retail credit because of high interest rates,” said B A Prabhakar, executive director, Bank of India.

Prabhakar said that home loans being charged interest rates of 10.75-11% now against 9.75% six months back. Similarly auto loans come at around 11.50-12% compared with 10.25-10.5% earlier.

“The auto segment growth will slow down because of high interest rates, high fuel prices and rising cost of input,” said Nitin Kumar, deputy vice president, Quant Broking. “This will be more pronounced in the first half because of a high base of last year,” he said.

Interest rates on loans have been rising due to repeated hikes in policy rates by the Reserve Bank of India. Banks have been passing along the impact of hikes to customers.

In the last financial year, retail credit grew by 17%. Within this segment, housing loans recorded a year-on-year growth of 15% and auto loans 24%.

“We had a growth of 22% in retail credit last fiscal. That will be difficult to sustain,” said Vivek Mhatre, general manager (retail banking), Union Bank of India.

IDBI Bank recorded a retail credit growth of about 35% last fiscal. R K Bansal, executive director (retail banking), said the bank has stepped down the target to 25% this fiscal.