Loans against shares and bonds grew the fastest followed by loans against fixed deposits for the financial year 2017-18, according to the latest bank credit figures put out by Reserve Bank of India (RBI). While industrial loans continue to limp, retail loans like home loans, car loans, credit cards, too, saw pace of growth slowing.

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Advances against shares and bonds rose 17% to Rs 5,600 crore as against a deceleration of 26% in the year-ago period, while advances against deposits grew 9.6% to Rs 72,500 crore as against a deceleration of 0.9%. Total bank credit grew 8.2% to Rs 77,22,300 crore, a shade higher than the previous year growth of 7.2%.

While growth in retail loans such as home/auto loans dipped, the high-yielding personal loans given to individuals continued to grow at 35.5% to Rs 50,800 crore during the financial period under review.

Though personal loans (retail book) of banks grew 17.8% to Rs 19,08,500 crore as against 16.4% growth in the year-ago period, major components of retail loans like home loans, credit cards and education loans showed signs of growth slowdown. Home loans grew 13.3% to Rs 9,74,600 crore, slower than the 15.2% growth reported in the same period last year.

The credit cards grew 31.6% to Rs 68,600 crore during the financial year (2017-18), slower than 38.4% growth reported last year, while education loans which was growing at 2.7% last year, decelerated to 0.5%.

To be sure, the pace of growth in retail loans have been falling over the past three years. With 11 public sector banks under prompt corrective action, bank credit, both to corporate and retail borrowers, have come down. Even in the retail segment, banks, especially the public sector banks are exercising caution to avoid surge in bad loans. On the other hand, retail loans have been growing at a steady pace for private banks like Axis Bank and HDFC Bank, which recently announced their quarterly numbers. Loss of jobs and inability to find new jobs may also have been adding pressure on household finances, said a banker who did not want to be named.

Praveen Kumar Gupta, managing director, State Bank of India (SBI), said, "Credit rating agencies now cover over 43% of the adult credit linked population. So credit history of individual borrowers are easily available to us, and it helps banks to expand the unsecured credit."

"For the first six months of the last financial year, home loans had slowed down during the introduction of the real estate regulator, Rera. But now, the trend has reversed and home loans have picked pace," Gupta added.

While the deceleration in industrial loans is reversing, the uptick is only marginal with most companies still depending on the corporate bond market for most of their working capital requirement while the demand for term loans or capex funding is almost absent.

KVS Manian, president - corporate and investment bank, Kotak Mahindra Bank, said, "On the corporate side, there is only working capital requirements from companies. But to understand the exact corporate demand, one needs to combine the loans raised from the corporate bond market and also the non-banking finance companies (NBFCs) which have lend to the medium-scale industries."

The RBI data shows that industrial loans extended by banks continued to limp, growing only by 0.8% to Rs 22,22,600 crore but still a marginal improvement over the previous year when the industrial loans decelerated by 1.7%. The micro small and medium industries also saw a slight uptick in credit growing at 0.9% over the preceding year when it decelerated by 0.5%.

...& ANALYSIS

  • Advances against shares and bonds rose 17% to Rs 5,600 crore as against a deceleration of 26% in the year-ago period  
  • Major components of retail loans like home loans, credit cards and education loans showed signs of growth slowdown