Personal loans are the new, risky growth vehicle

With corporate lending facing a squeeze, banks are increasingly turning to retail customers to sell loans and the results are telling.

Published: 03rd April 2018 01:33 AM  |   Last Updated: 03rd April 2018 01:56 AM   |  A+A-

Image for representational purpose only

Express News Service

MUMBAI:  With corporate lending facing a squeeze, banks are increasingly turning to retail customers to sell loans and the results are telling. According to the Reserve Bank of India’s latest sectoral credit growth data, personal loans have grown at the fastest pace among all loan categories in the past one year, registering a healthy double-digit growth.

RBI data show that personal loans – considered a risky business for banks as there is no collateral – grew at 20.4 per cent between February 17, 2017 and February 18, 2018.

This is the highest sub-sector growth as gross credit growth during the same period was 8.8 per cent, industrial credit growth 1 per cent, agriculture and allied activities 8.4 per cent, and services clocked 14.2 per cent. Within the personal loans category, credit cards led the pack with a staggering 33.4 per cent growth, followed by housing at 16.5 per cent. However, loans to consumer durables and education loans fell 6.5 per cent and 2 per cent, respectively.

And, perhaps for the first time, the total outstanding towards personal loans at Rs 18.54 lakh crore exceeded the services sector, which has an outstanding of Rs 18.4 lakh crore as on February 16, 2018. On an annual basis, non-food bank credit rose 9.8 per cent in February 2018 compared with a growth of 3.3 per cent a year before.

Within industries, credit growth to large firms swelled one per cent against a contraction of 5.2 per cent. Credit to major sub-sectors like textiles, chemical & chemical products, engineering, food processing and rubber, plastic and their products accelerated.

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