Banks cash in on retail loans

Y Prakash, working for a private company, wanted a ₹5-lakh personal loan to meet some family expenses. It took exactly 48 hours for him to get the loan amount to his account from HDFC Bank.

Surely, you might have also noticed an increase in emails, SMSes and telemarketing calls asking whether you need a loan. The reason: Both private and public sector banks are now stepping up focus on retail lending in the absence of tangible demand for loans in others sectors, such as corporates and, to some extent, even small and medium enterprises.

“Our focus on retail loans has been paying off and we will continue to focus on this segment, going forward,” Rajeev Rishi, Chairman and Managing Director, Central Bank of India, told Business Line .

While personal loans are increasing in numbers with some banks going the extra mile to lend to non-customer applicants as well, the other growing segments in the retail portfolio of banks are housing, vehicle and gold loans.

According to M Anjaneya Prasad, Executive Director of Syndicate Bank, in the third quarter of the current fiscal there was a steady increase in home loans. “The gold loan portfolio of many banks, including ours, has been increasing steadily,” he said.

Most of the other banks have plans to step up retail lending.

Easy process Increasing use of Cibil data, which have records of an individual’s payments pertaining to loans and credit cards, is helping banks process retail loans with greater confidence than earlier. “Almost all banks are first checking Cibil data before even formally processing any loan application. Compared to the 2009-11 period when most banks suffered stress in retail assets, the quality of assets has improved,” said a senior official of Indian Overseas Bank.

In the third quarter of the current financial year, retail lending for most banks had grown in the 16-23 per cent range. Bankers say this is likely to increase further.

In the current economic scenario, the credit growth in the banking sector would depend on retail lending to a significant extent, according to CVR Rajendran, Chairman and Managing Director of Andhra Bank.