Retail loans set to double to Rs 96 trn in next 5 yrs: ICICI-CRISIL report

The retail loan book of financiers will double to Rs 96 trillion by March 2024 due to higher private consumption, willingness to take loans and usage of data analytics, a recent study revealed.

According to a study jointly conducted by private sector lender ICICI Bank and rating agency Crisil, retail loan book of financiers in India will double to Rs 96 trillion by March 2024, compared with Rs 48 trillion in March 2019.

"We believe that this rapid growth will take place in the next five years on the back of increased demand for private consumption and the willingness especially, from the youth to take loans. Also, we are witnessing the trend of urbanisation and nuclearisation, which we believe will drive the demand," the bank's executive director Anup Bagchi told reporters.

He further said that the availability of large data from the traditional and non-traditional sources is helping financiers leverage technology and data analytics which has given lenders confidence to lend.

Apart from this, the regulatory and legislative measures taken by the government in the past few years have propelled growth in low-cost housing loans.

"Besides, the initiatives like GST has resulted in MSMEs availing more funding and thus the loans to this sector have also gone up," Bagchi said.

The report is based on interviews with 200 experts from the retail loans industry, ICICI Banks deep understanding of the consumer finance category, Crisils proprietary economic projection models, publicly available company disclosures, annual reports and industry data from RBI among others.

It also noted that mortgage loans marketnormal and low-cost housing and loan against propertyis expected to double to Rs 46.1 trillion in FY24.

Further, unsecured loans -- personal loans and credit cards are expected to more than double to Rs 13.8 trillion in FY24 while the credits to MSMEs are likely to more than double to Rs 13.2 trillion.

Also, vehiclescommercial vehicle, two and four wheelerloans are tipped to nearly double to Rs 17.5 trillion.

According to Crisil COO and President Amish Mehta, the expectation of the doubling of retail loans is also based on the expectation of the GDP estimated to grow to 6.5-7 per cent.

"Growth is expected to be higher in smaller cities outside the top 50 cities. We expect players with a strong funding franchise, strong focus on technology and a balanced mix of secured and unsecured loans among others to be ahead of the pack in the retail loans sweepstakes. The top five players are foreseen continuing their dominance of the market, across asset classes," Mehta added.

According to Bagchi greater information availability progressively reducing the risk in lending, lower costs for customers due to intensifying competition and regulatory and government initiatives will support the expansion of the retail loan market.

The report stated that digital lending which was estimated at Rs 2.7 trillion as of March 2019, is forecast to increase to Rs 15 trillion by FY24, representing 16 per cent of retail lending.

Also, banks will dominate the market, accounting for 77 per cent of total digital lending.

According to the report, the other key drivers include enhancing focus on digitisation of ownership of land records and providing access to the same to financial institutions with requisite consent, greater thrust on digital payments and developing industry-wide standards on key aspects such as innovation hub and environment, data security, customer privacy, consumer protection and loan pricing.

Further, new private banks are also expected to gain market share from their public sector peers, it said.

Additionally, the entry of new types of players is likely in the market targeting specific segments, in line with global trends, according to the report.