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Banks focus on retail lending has helped to boost retail credit with outstanding retail loans growing by 14.5% year-on-year for March compared with a growth of 12.9% recorded in March 2012, shows data released by Reserve Bank of India (RBI) on Tuesday.
All other major segments slowed during the year 2012-13 data showed.
The focus of banks had shifted towards retail loans as economic growth had slowed down last fiscal due to which credit demand from corporates was muted. Credit to industry grew 15.7% y-o-y compared to 20.3% last year.
Fall was also observed in priority sector lending. Credit in priority sector grew 8.6% y-o-y compared to 12.1% growth last year.
In personal loans all segments grew except for education loans which slowed down. Though lending against fixed deposits, shares and bonds also slowed down – such portfolio forms a very small amount of the banking systems asset book. Vehicle loans grew 24.9% y-o-y compared to 22.2% last year. Credit card outstanding showed growth of 23.8% as compared to 12.9% last year.
Housing loans showed growth of 14.6% compared to 12.3% growth last year. In the year banks have significantly lowered the interest rates on retail boosting the credit growth in this segment.
In priority sector, direct lending to agriculture grew at 8.1% compared to 13.3% a year ago. Loans to priority sector housing were almost flat rising just 0.6% compared to 10.7% last year. Education loans in priority sector also grew at lesser pace rising 9.4% compared to 12.3% last year.
Recently finance minister had asked banks to be proactive in lending to students for education. Reserve bank of India also had said that the private and foreign banks in particular don’t give education loans.
K C Chakrabarty, deputy governor, RBI last week had said that banks need to finance aggressively for educational loans.
