Will the personal loan rush pay off for the banking industry? – The New Indian Express
Personal loans could become the most important segment of global bank credit in 2020-2021. The segment, comprising among others real estate, automobile and personal loans, has already dethroned the service sector (an exceptional crore of Rs 26.6 lakh) from its second place and is lagging behind the industrial segment, which has a narrow lead. .
The latest data from the Reserve Bank of India shows outstanding retail loans stood at Rs 27.74 lakh crore in February, just a few notches below the outstanding industrial credit at Rs 27.86 lakh crore.
In percentage terms, retail loans now represent 29 percent of total outstanding loans, while industrial credit accounts for 29.1 percent.
By the time the data for March is released, there is a good chance that this will be reversed. But whether the retail segment can maintain the top spot and for how long depends on the speed at which industrial credit resumes its growth.
Currently, industrial credit is on the decline, but once back on positive ground, the retail segment will struggle to keep pace as it is made up of dozens of small loans and banks need to increase and speed up disbursements. . .
On the other hand, industrial loans have three sub-segments small, medium and large, but a large part of the growth in value comes from large industries taking large loans, resulting in a decrease in the number of borrowers.
“Industrial credit continued to decline by 0.2% in February. However, the rate of deceleration has moderated. These trends are expected to have been driven by significant industrial credit, which constitutes 82 percent of industrial credit and which declined 1.5 percent year over year. Micro and small industries also grew only 1.5 percent year over year, ”noted Krishnan ASV, industry analyst, HDFC Securities.
In retail, housing, auto loans and credit cards are the three largest sectors. The housing sector alone accounted for 52.3% of all personal loans.
Overall, the segment was up 9.6% from the previous year, after hitting a 10-year low of 9.1% in January.
This trend was led by home loans, which increased 8.5 percent, followed by other categories.