Retail loan books of banks are holding up despite a slowdown in the economy as banks are pushing retail loans, such as home loans, car loans, credit cards and educational loans.
Among a slew of retail loans, the loans for consumer durables purchases, which banks are discontinuing these days, are the only portfolio that has shown negative growth. The credit cards category, which hit a slow lane a couple of years ago, has recorded slow growth because banks have begun promoting their credit cards. Some banks are also dispensing credit cards against a fixed deposit.
The growth in the retail loans helps banks offset the growth in the corporate loan book. In the corporate loan book, the sanction and the disbursal is a long process, say bankers. "Even after sanctioning limits for companies, there is a big time lag for actual disbursal, resulting in banks calling back the loans in many cases so that it can be sanctioned to some other companies," said a senior public sector banker.
Jairam Sridharan, senior vice-president and head of consumer lending and payments, Axis Bank, said the bank is trying to push its retail portfolio quite strongly so that it will be at least 30 per cent of the overall loan book of the bank. "So, we are growing higher than industry. The industry growth for mortgages is about 15 to 20 per cent," he said. The retail book of the bank is about Rs 21,430 crore, of which 75 per cent are home loans.
Public sector banks such as Bank of Baroda, Canara Bank, Bank of India and Central Bank of India have all extended the festival offers till March 31, 2012. Under these offers, the borrower gets about 0.25 to 0.50 per cent discount on home loans with no processing fees, which is 0.5 per cent of the loan.
Ram Saganpure, head of retail lending at Central Bank of India, said banks are consciously focusing on retail loans to push advances growth. "The investments slowdown in the economy has impacted the pickup in corporate loans. So, the banks are focusing on the retail loans to stay profitable. We are seeing very good growth in our home, auto and education loan portfolios," he said.
Most of the public sector banks, except the State Bank of India (SBI), which is the market leader in home loans and auto loans, have a relatively small retail portfolio – in the range of Rs 5,000 crore to Rs 10,000 crore. These lenders have improved their risk management systems to track delinquencies that erupt on the small retail loans, with most of them engaging recovering agents to lower the number of bad loans.
NS Srinath, executive director in charge of retail loans, Bank of Baroda, said the bank is pushing all loan products, but the demand for retail loans is still coming both from the larger cities and the smaller towns. "The retail loans like the home loans and car loans are growing the advances for the bank," Srinath said.
Bigger private banks such as HDFC Bank and ICICI Bank are also pushing their retail portfolio. While ICICI Bank is focusing on home loans and car loans, HDFC Bank is pushing all its retail products like home loans, car loans and credit cards. ICICI Bank, however, is not focusing on unsecured loans and credit cards.
Bhaskar Niyogi, chief general manager, SBI, said, "Certainly, there is growth, but the pace of growth in home loans has come down over the year. In certain markets, the high prices are keeping away borrowers. In other markets, it is the lack of supply that is keeping people away."