Festive season brings cheer for banks in retail credit

The reduction in interest rates by banks in home loans has finally helped them garner a higher month-on-month growth this festive season.

The growth in home loan dues in absolute terms was Rs 7,200 crore on a month-on-month basis in October, compared with a growth of Rs 3,046 crore in October 2011, according to Reserve Bank of India’s data.

Home loans contribute the largest segment of retail loans for banks.

It was the same case with vehicle loans and there, too, banks had reduced the interest rates.

The growth in vehicle loan dues in absolute terms was Rs 1,300 crore on a month-on-month basis in October, compared with a growth of Rs 1,107 crore in October 2011.

The growth was despite the fact that fuel prices rose.

According to D Sampath, head-retail banking, Federal Bank, the growth in home loans and vehicle loans continued in November, and is expected to continue in December.

To boost growth, banks had reduced or waived processing charges.

The entire retail loan portfolio grew Rs 14,900 crore on a month-on-month basis in October, compared with growth of Rs 7,627 crore in October 2011.

In a scenario where corporate credit continues to be sluggish, banks are focusing more on retail loans.