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With credit growth continuing in single digits, banks and non-banking financial companies (NBFCs) are expecting loan pick-up to remain muted this festival season.
Typically, lenders roll out a slew of offers in the season. These include less interest on loans, waiver of processing fee and cash-back and reward points on credit/debit card spending. However, despite the offers, the earlier festival season remained tepid and this year is not expected to be different. As a result, lenders will be cautious in offering discounts.
“There are no data points or reasons pointing towards a great pick-up. Consumer sentiment is not as strong as we would want it to be and, therefore, my belief is that it might be slightly better than last year but nothing exceptional,” said Jairam Sridharan, head-retail lending & payments, Axis Bank.
In the April to June quarter, credit in the banking system fell 2.5 per cent and deposits by 1.26 per cent. In FY15, credit to business grew at the slowest pace in 17 years at 9.5 per cent.
Retail lending has been growing at a better pace than overall credit. However, vehicle loans grew only 16.8 per cent between May 2014 and 2015, compared to 21.8 per cent growth over May 2013-14. Growth in consumer durables tapered to 13.1 per cent from 56.4 per cent in May 2013-14. Housing loans grew 17 per cent, similar to the previous year.
NBFCs, too, are sceptical about a major pick-up in growth this festival season. Typically, they get a majority share of their business in the festival season, starting from August.
“In the next 60 days, if things play out well in terms of slightly better rains and there is a further fall in interest rates, the season should be better. There were a lot of pre-monsoon rains, due to which the summer season was not better this time, with deferred purchases of air conditioners. There is also a need for the overall mood to improve and this means growth in wages, feeling bullish, etc. August 15 is the next trigger for us, so let us see how things improve in this time,” said a senior official of a large NBFC.
“Gold prices are low and we might see some buying in that segment but apart from that, we are not expecting a major pick-up. As a result, it is likely that banks are a little cautious in rolling out offers. There will be some specific ones but the majority of offers will not come from the bank side but from developers or the retailer’s side,” said another banker, requesting anonymity.
