Anticipating a surge in demand for retail loans, both large and mid-sized banks are gearing up for significant growth in this sector. Projections indicate that major banks expect a robust 20-25% increase in retail loans, while their smaller counterparts are hopeful for an even higher rise of 30-35%. Among the various types of retail loans, personal, auto, and home loans are anticipated to be the primary areas of customer interest, with a notable upsurge expected in these categories, according to banking industry insiders.
The festive offers and the resulting surge in loan demand are predicted to contribute significantly to the third-quarter earnings of banks. Over the past decade, there has been a substantial shift in the composition of banks’ credit portfolios, with the share of retail loans in the total credit rising from 22% to 33% as of March this year, as highlighted by Ajit Kabi, a banking analyst at LKP Securities.
Recent data from Care Ratings also reflects a positive trajectory in credit offtake, indicating a notable year-on-year growth of 20% to reach Rs151.5 trillion for the fortnight ending on September 22, 2023. This growth is primarily attributed to the impact of HDFC’s merger with HDFC Bank. Excluding the merger impact, the credit growth stood at a slightly lower rate of 15.3% year-on-year, indicating a stable yet positive growth trajectory.
Industry experts emphasize that the third quarter typically witnesses a surge in retail loan demand, aligning with the upcoming festive season, which remains a peak period for such transactions. Moreover, customers tend to time their purchases of electronic goods and home appliances during this season, leveraging the festive discounts and special offers provided by companies during occasions like Dussehra and Diwali. With the ongoing momentum in the banking sector, consumers can look forward to a plethora of enticing offers and benefits as the festive fervor gains momentum.
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