Rate cut fails to boost retail loan growth

Interest rate cuts by banks doesn't seem to have boosted loan growth in the retail segment, latest data from the Reserve Bank of India show.

The retail loans grew by 12.6% to Rs 8,18,835 crore in September 2012, slower than 15.2% growth in September 2011. The slowdown in retail loan was mainly due to a lack of pick up the growth of the housing loan segment, which makes up for the majority of the retail portfolio.

Housing loan growth was 11.2% in September compared with 15.6% growth last year, even after most public sector banks offering discounted interest rates and waivers on their home loans. The country's largest bank, State Bank of India, however has seen a sharp pick up in sanctions of home ever since it dropped rates in August. Most banks have followed suit ever since. Most bankers are also sanguine that home loan growth would pick up in the coming months.

The biggest slowdown in retail portfolio has been of loans towards purchases of consumer durables, which have dropped by 17% in September. In September 2011, consumer durable loans had shrunk by just 6%.

Bucking the trend, auto loans grew at a faster pace of 22% as against 19.3% in September last year. Most banks are relying on the retail loan portfolio to boost overall credit growth amid deceleration in corporate loan growth.

Credit offtake to companies grew by 15.9% compared with 18.7% last year. Growth in loans to large industries was 19.4% to R15,56,601 crore, while growth of loans to medium and small corporates was 0.6% and 7% to respectively.

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