While corporate loan asset quality is coming under pressure, banks are increasingly moving to retail lending. The retail lending market rose significantly over the past year.
As a result of that, the number of consumers who have access to some of retail loans such as home loans, personal loans, credit cards etc. has increased by 24.5% to reach 26.1 trillion in the first quarter of 2018-19, this is mainly due to 31% rise in the number of live accounts in the first quarter of 2018. However, the delinquency rates for the first quarter of 2018 remained stagnant compared to the last year.
Retail lending grew due to a combination of positive factors on both the demand and supply side. “While increased focus of banks and non-banking financial companies (NBFCs), and increased capital availability drive the supply; increasing economic growth and domestic demand are the driving forces behind the sharp rise in demand,” says Yogendra Singh, vice-president of research and consulting, TransUnion CIBIL.
While delinquency rate for home loans and credit card increased marginally by 4 basis points and 9 basis points respectively, loans against property went up by 33 basis points.
The number of accounts has seen a steep rise for all major retail products, including auto loans, personal loans, consumer durable loans, credit cards, home loans, and loans against property over the past year, with consumer durable loans showing the strongest growth of 83% in the first quarter of 2018.
As the average ticket size of retail loans grew marginally, the rise in retail lending market was mainly driven by a high volume growth.
The retail lending industry continued to see a robust and sustainable growth. Account opening and balances increased extensively over the past year. An increasing number of consumers gained access to credit, while delinquency rates were somewhat under control and generally remained flat or trended downward. Default rates have declined moderately by 0.83% and 0.43% in auto and consumer durable loans respectively.
“It is the sign of a robust and maturing economy that more consumers are viewing credit as a useful tool in managing personal finances”, CIBIL added.