Lending to the retail sector does not pose any major risk to banks’ balance sheets despite this segment outgrowing overall credit growth and the share of unsecured loans rising within retail.
“Credit growth remains robust despite some moderation. Even at the anticipated pace of growth for FY2024, incremental credit expansion would be the second highest ever at Rs 16.5-18 lakh crore, next only to the record level of Rs 18.2 lakh crore (15.4%) last year,” said Anil Gupta, senior VP and group co-head, ICRA.
The rating agency’s statement comes at a time when there have been reports that RBI is keeping a watch on the growing unsecured loan books of banks. Banks have been growing unsecured retail loans by advancing ‘pre-approved personal loans’, which are essentially credit that has been sanctioned by the banks’ systems based on parameters set by the bank.
The increase in bank credit is driven by retail, which is growing faster than overall bank credit. The share of retail in bank loans has risen to over 32% in June 2023 from 18% in 2013. Within retail housing is the largest segment accounting for nearly half of the loans in this category. However, the share of unsecured loans has been steadily rising.
Gupta said that going by current indicators, banks are well-placed to manage any delinquencies in unsecured loans given their capital position and operating profits.
