The devil in retail: Stress seen in credit cards, auto, and home loans

Delinquencies in banks’ retail portfolio is inching up. This comes even as the share of retail credit to GDP increased to 12 per cent in HIFY20 — a full percentage over the 11 per cent seen in FY08. The increase in stress was seen in credit cards, auto, and even in home loans. Banks had grown their retail books in a big way in recent times given the lacklustre demand for corporate credit. The Reserve Bank of India’s Financial Stability Reports of recent times had forewarned about the pain lurking in the retail segments. The central bank’s Report on the Trend and Progress of Banking (2018-19) observes that banks’ diversification strategy (into retail), while helpful as a risk mitigation tool, “has its own limitations: the slowdown in consumption and overall economic growth may affect the demand for and the quality of retail loans”.