Slowdown Blues: Retail banking growth showing signs of moderation

In the recent past, the banking sector's credit growth was running on a single engine that is retail banking as the corporate growth slowed down considerably after the global slowdown and the slide in the Chinese economy.

According to recent RBI data, a major decline has taken place in the newest segment of consumer durable financing, where some non-banking financial companies (NBFCs) have made bigger stride. The banks' support to consumer durable financing has seen a slump of close to 70 per cent. The banks' outstanding credit to this segment was in the region of Rs 20,000 crore plus, which has now gone to Rs 6,000 crore level.

Similarly, education loan financing by banks has seen negative growth.

The recent downside vehicle loan data also reflect in the financing numbers. The vehicle loan financing has fallen to a single digit. This segment, which grew by over 11 per cent in 2017-18 to Rs 1,89,800 crore has grown by 6.5 per cent in 2018-19 to Rs 2,02200 crore.

The sign of retail banking slowing down is also visible in the growth of unsecured loans, especially, credit card and personal loans. These two segments were witnessing the highest growth at 20-30 per cent plus, much higher than mortgages and vehicle loans. In fact, these two retail segments also bring the highest yield or returns because of the unsecured nature of the product.

The credit card outstanding growth was at 28 per cent, down from 31 per cent in the previous year. Similarly, the personal loan segment saw 19.4 per cent growth as compared to 35.3 per cent in the previous year.

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