Banks reeling from the demonetisation impact have struggled to offer retail loans during the three months beginning November, 2016. However, bankers see this as a blip.
As per the Reserve Bank of India data, the retail loan growth in November slowed to 15.3 percent from 18 percent on a year-on-year basis. Similarly, the December growth in the segment further dropped to 13.5 percent from 18.5 percent.
The situation further worsened in January 2017 with retail loans down at 12.9 percent from 18.1 percent in January 2016.
Even as private sector banks are showing steady progress in the retail segment, public sector banks have suffered because of subdued growth in housing and personal loans.
A senior executive from a top public sector bank said: “People were waiting and watching especially to buy houses and so there was a huge slowdown in loan demand. January was unlike how it should have been.”
However, the official expressed hope that with a push given in the direction of affordable housing and lower interest rates, business could pick up by this month end.
Bankers are hopeful that the retail growth story will continue to be their cash cow.
Rajnish Kumar, Managing Director (National) at State Bank of India said, “Indians will continue to consume and the retail growth story is intact…Post the merger, our retail book will grow by about Rs 3 lakh crore from SBI’s current book of about Rs 6.75 lakh crore taking the total to nearly Rs 10 lakh crore.”
To bump up its retail loans portfolio, Bank of Baroda has plans to put in place a 2,000-strong dedicated sales force, which will supplement the efforts of the branches to push home, auto and personal loans. It has also appointed a new head for its credit card business.
“We are investing in the sales engine to originate loans and building analytics. We are also pre-approving our existing savings account customers based on their balance, etc and looking at mining our customers, said Bank of Baroda Managing Director and Chief Executive Officer PS Jayakumar, in a post results conference last month. He mentioned that these measures will result in a substantial jump in the bank’s retail book.
In January 2017, housing loans grew much slower at 13.5 percent from 18.4 percent a year ago. During the same period, the unsecured personal loans also were listless at 13.3 percent as against 25.5 percent a year ago. The numbers were more or less similar in the November and December period.
However, the optimism in banks is driven by the affordable housing push by the government and the expanding consumption economy.
And despite headwinds to growth from demonetisation, the overall GDP growth for the fiscal year 2016-17 ending in March has been pegged at 7.1 percent.
Moreover, vehicle loans and credit card growth have shown steady improvement with an average of 19.5 percent year-on-year (from 16.2 percent) and 26.1 percent (from 25 percent) during the demonetisation period of November to January.