The banking sector is set to get boost from the upcoming festival season as banks are expecting high demand for retail loans. Large banks are expecting 20-25% growth in retail loans while mid and small size banks hope to see 30-35% increase. Within the retail segment, customers will be chasing personal, auto and home loans, say bankers. Higher loan growth will also help the lenders to post better third quarter earnings.
“In terms numbers, personal and auto loans for two and four wheelers come on the top while home loans comes at the top in terms of volumes. We have seen around 20-25 percent increase in retail loans in previous years and this time we are expecting the same level of growth,” head of consumer banking of a large private bank told FE.
Banks have sweetened the deal for customers by announcing festive offers. Lenders are offering complete waiver of processing fees, reduced rates on home and auto loans and cash back deals.
“Strong festive demand will help banks to post higher earnings numbers in the third quarter. Banks have been growing their retail loan portfolio in the past few years. A decade back the share of banks’ retail loan in total credit was 22% which has risen to 33% as of March end this year,” Ajit Kabi, Banking analyst at LKP Securities told FE.
Credit offtake grew by 20% year on year (y-o-y) to reach Rs151.5 trillion for the fortnight ended Sep 22, 2023, primarily driven by the impact of HDFC’s merger with HDFC Bank. If merger impact is excluded, credit grew at a lower rate of 15.3% y-o-y fortnight compared to last year, according to Care Ratings data.
“The third quarter is always action packed for retail loans while the first two quarters are relatively dull. The momentum in retail loan demand gains pace from the third quarter and continues till the fourth quarter,” head of liabilities of a midsize banks told FE. “We are expecting around 30-35% increase in retail loans in the third quarter,” he said.
Customers tend to align their plans to purchase electronic goods and home appliances with festive season because they know that the companies also launch festive deals offering discounts for Dushera and Diwali.
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