Retail loan boom despite tight liquidity

The retail loan growth story continues despite rising interest rates and the liquidity squeeze being faced by banks.

ICICI Bank, the most aggressive among all the banks riding a retail lending boom, has seen its retail portfolio grow by about 70 per cent in 2005-06 so far.

The country's largest bank, State Bank of India (SBI), has seen retail loans playing a major role in its overall loan portfolio growth. The bank has, in fact, witnessed a 2 per cent drop in the growth of its loans to top corporates.

According to bankers, the retail loan segment is likely to end the year with around 40 per cent growth against over 30 per cent in the overall loan portfolio of the banking industry. Non-food credit in 2005-06 up to March 3 increased by Rs 3,46,321 crore to Rs 13,78,436 crore, on top of a Rs 2,45,114-crore rise in 2004-05.

Rising interest rates are still not acting as a deterrent for retail borrowers, and several banks still have sizeable sanctions in place.

"Our home-loan portfolio is growing substantially," said TS Bhattacharya, managing director, SBI. An executive with a private bank said the bank's home loans had been growing at a phenomenal pace but there was a slowdown in car-loan growth.

ICICI Bank's outstanding retail loans had increased to Rs 78,000 crore by the end of December 2005 and it expects to end 2005-06 with outstanding retail loans of Rs 90,000 crore. This will translate into loan disbursements of Rs 12,000 crore in the fourth quarter of 2005-06.

The net retail loan growth for ICICI Bank in 2005-06 will be Rs 36,000 crore. Till February 2006, SBI had net growth in retail loans of nearly Rs 13,000 crore with its outstanding retail loans at Rs 59,434. Retail loans constitute 64 per cent of ICICI Bank's total loan book, while for SBI, the share of retail loans is 23 per cent.

Bank of India's (BoI) retail credit grew by 33.83 per cent in the first nine months of 2005-06 and the share of retail credit in total non-food credit increased to 26.85 per cent from 24.22 per cent.

The share of incremental retail credit in incremental non-food credit for BoI stood at 39.58 per cent. BoI's retail loans increased by Rs 3,227 crore to Rs 12,767 crore in the nine months ended December 31, 2005.

Punjab National Bank (PNB) witnessed a 35 per cent growth in retail advances in 2005-06 with outstanding retail loans at the end of December 2005 at Rs 14,229 crore. Retail loans account for 20.7 per cent of the total net credit.

Housing loans contributed the most to the retail boom. For ICICI Bank, home loans account for about 50 per cent of the retail loan growth and car loans another 20-25 per cent. For most of the public sector banks, housing accounts for 30 to 40 per cent of the retail loans.