DNA Money Edit: Where have the consumers disappeared?

The slowdown in consumption demand across the segments has hit the banking industry. As reported by DNA Money, auto, education and personal loans have all seen a significant slowdown in their pace of growth. Despite a 12.2% growth in gross bank credit in 2018-19, retail loans have turned tepid. The Reserve Bank of India (RBI) data shows that retail loan growth in 2018-19 has slowed 16.4% to Rs 22,20,700 crore over the preceding year.

As the automobile sector takes a slow lane, auto loans have taken a sharp U-turn too and grown only 6.5%, down from the 11.3% growth reported a year ago. Auto dealers are staring at a major drop in retail sales of vehicles. Amid the ongoing liquidity crunch in non-banking financial companies (NBFCs) and the political uncertainty ahead of the election results, potential customers have stayed away from the showrooms. The retail sales of vehicles across segments declined by 8% year on year to 16.38 lakh units in April.

During 2018-19, education loans have reported degrowth of 2.5% over the previous year. The home loan sector, however, grew 19%, up from 13.3% in the previous fiscal, riding the priority sector housing loans. Experts believe that the slowdown in the pace of retail loans is partly a reflection of the general slowdown in the economy. This may be an immediate challenge for the new government at the Centre.