Indian commercial banks’ retail lending has risen faster than loans to large businesses since the COVID-19 pandemic, S&P Global Market Intelligence data showed, underscoring the central bank’s concerns about unsecured loans.
Retail loans was the fastest-growing segment among the three biggest private sector lenders, and among their state-owned peers, since at least the fiscal year ended March 2021, Market Intelligence data showed.
An example of this is State Bank of India, the country’s biggest lender by assets, where retail loans grew 42.7% to Rs 12.43 trillion by September 30, 2023, from Rs 8.71 trillion as of March 31, 2021. Credit to corporates was up 19.4% over the same period. Bank of Baroda where retail loans increased 61% in the same period, and Axis Bank, where retain loans rose 57% — showed a similar trend, the data showed.
Retail loans are made up of housing loans, consumption loans for the purchase of durables, auto loans, credit cards and educational loans. Earlier, the RBI raised concerns over unsecured advances, a risky segment of retail loans, as the proportion of such advances increased to 35% in 2023.
Strong economic growth in India has prompted high demand for credit in the country. Unsecured loan growth grew as demand for credit increased in the post-COVID era, and banks’ lending moved toward the retail loans segment. Bank credit rose 15% in the financial year ended March, 31, 2023, led by personal loans, which registered a growth of 20.6%, RBI data showed. Loans to the industry, however, grew only 5.7% in this period.
