The rise and rise of retail loans, now over ₹50 trillion

livemint.com:

₹50 trillion milestone for the first time in November 2023, latest central bank data showed. This was aided by demand from individuals, a push by banks and the merger between HDFC Bank and erstwhile mortgage lender Housing Development Finance Corp. Ltd (HDFC).

Retail loans grew at an eye-popping 30% year-on-year (y-o-y) in November, which stood at 19% when adjusted for the merger cited above. In the same period, loans to industry rose at a sedate 6.6% y-o-y to cross ₹36 trillion. Historically, corporate loans have far outstripped aggregate retail loans from banks, especially because of their larger ticket sizes.

That changed about three years ago when retail loans surpassed credit to corporates for the first time on 20 November 2020. From that date till 17 November 2023, outstanding retail loans grew at an express 79%, while corporate loans grew at a more measured 28%. The current retail numbers are skewed somewhat by the HDFC-HDFC Bank merger.

India’s largest private lender took into its fold its parent HDFC on 1 July 2023, leading to loans of the housing financier becoming part of the banking system. On an outstanding basis, as on 17 November 2023, the merger led to an additional ₹5.8 trillion of non-food credit, ₹4.4 trillion of which was in retail loans, showed data from the Reserve Bank of India (RBI). The meteoric rise in retail loan growth has ensured such loans corner a larger share in aggregate non-food credit, leaving behind corporate loans.