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Retail loans surge without people borrowing money: Blame data entry rule for showing soaring bank credit

Samrat Sharma
SBI, HDFC Bank, Bank of Baroda, Bank Of India, cut MCLR rates, auto loan, home loan, personal loan, interest rates on loan, cheaper loan, retail loan, retail securitisation, securitisation

Retail credit of banks has skyrocketed but the money lent has not reached the consumers. Eventually, despite high retail bank credit growth, the shops are struggling with fewer customers to buy. The reason behind this confusion is a complex classification of bank credit. The loan receivables by the non-banks are now sold to investors, also termed as retail securitisation transactions, says a CRISIL report. Thus, this money does not reach the consumers and remains out of the market. However, these loans are still considered as 'retail loans', which keeps on adding to their number.

The data shows that retail credit of banks grew 16.6 per cent, or twice the speed of overall bank credit. However, supporting the above assertion, another set of data also shows that the retail securitisation volume doubled last fiscal and has soared 39 per cent in the first half of the current fiscal year. Even the overall lending for securitisation shot up to 31 per cent of the incremental bank credit last fiscal, compared with 17 per cent in 2017 and 11 per cent in 2015.

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Consequently, the growth in lending after deducting securitisation flows shows a fall from 16 per cent in FY19 to around 12 per cent till now. This is also the slowest growth in the last five years, that goes in-line with India's economic growth. In the first quarter, India clocked a GDP growth rate of a mere 5 per cent, which was the least in the last six years. Despite, announcing several fiscal measures in the second quarter, the GDP growth further slid to 4.5 per cent. 

The present slowdown in the retail credit growth indicates both macroeconomic challenges which have constrained loan demand and fewer loan sanctions by banks, says the CRISIL report. Sales of automobiles have been plummeting, while sales of consumer durables, housing, and many other consumer-oriented sectors have been sluggish.