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Indian banks see revival in mortgage progress however issues linger

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MUMBAI: Indian banks are loosening their purse strings and lending extra as pent-up demand surfaces within the Indian festive season, although progress remains to be practically half that seen final yr.

Several lenders together with State Bank of India, the nation’s largest lender and HDFC Bank, India’s most dear financial institution by market capitalisation noticed demand for housing and car loans return to close pre-pandemic ranges within the quarter ended September.

“Now that the loan moratorium is over and we have a clearer view about repayments, we’re feeling more comfortable about lending both on unsecured as well as secured retail loans,” stated the pinnacle of retail banking at a public sector financial institution, who requested to not be recognized because the lender has but to report its outcomes.

Hamstrung by the pandemic, banks had been extra threat averse in lending, with credit score progress slumping to round 5 per cent within the first quarter of the monetary yr.

“Hamstrung by the pandemic, banks had been more risk averse in lending, with credit growth slumping to around 5% in the first quarter of the financial year.”

— Hit Hard By Covid

The uptick spells excellent news for the Indian economic system that had contracted by 23.9 per cent in April-June, throughout a stringent lockdown to stem the unfold of the pandemic.
“After a complete standstill earlier, banks have now also started buying more retail loan securitisation pools from non-banking financial companies to boost their portfolio which has also helped credit growth pick up,” stated Anil Gupta, analyst at credit standing company ICRA.

Even although retail demand has picked up nonetheless, company credit score demand continues to stay sluggish.

“Even though retail demand has picked up however, corporate credit demand continues to remain sluggish.”

— Slow Corporate Credit Growth

Analysts additionally famous that progress nonetheless stays slower in comparison with final yr. In September, retail loans grew by 9.2 per cent in comparison with 17 per cent in the identical interval final yr, based on regulatory knowledge.

“It’s too early to start celebrating as a clearer picture around the bank’s financial health will emerge only in January-February,” stated Jindal Haria, an analyst with India Ratings.

“Banks have also tightened their lending parameters so it is likely that retail loan growth may not go back to the highs of 20% plus growth in prior years”

— Analysts

Banks have additionally tightened their lending parameters so it’s probably that retail mortgage progress could not return to the highs of 20 per cent plus progress witnessed in prior years, Haria added.

Sustaining the demand momentum past the festive season will rely upon the containment of COVID-19 and lender resilience, ranking company Emkay Global stated.




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