Indian banks see resumption in loan growth but concerns persist
MUMBAI (Reuters) – Indian banks are loosening their purse strings and lending more as pent-up demand surfaces during the Indian holiday season, although growth is still nearly half that of last year.
Several lenders, including the State Bank of India, the country’s largest lender and HDFC Bank, India’s most valuable bank by market capitalization, have seen demand for home and auto loans return to near levels. before the pandemic in the quarter ended in September.
“Now that the loan moratorium is over and we have a clearer picture of repayments, we feel more comfortable lending on both unsecured and secured retail loans,” said the head of retail banking from a public sector bank, which asked not to be identified because the lender has yet to report its results.
Paralyzed by the pandemic, banks had been more risk averse to credit, with credit growth slumping to about 5% in the first quarter of the fiscal year.
The rise is good news for the Indian economy which contracted 23.9% in April-June, during a strict lockdown to stem the spread of the pandemic.
“After a complete shutdown earlier, banks also started buying more retail loan securitization pools from non-bank financial companies to strengthen their portfolios, which also helped the recovery in credit growth.” said Anil Gupta, analyst at the ICRA rating agency.
Even though retail demand has picked up, demand for business credit remains sluggish.
Analysts also noted that growth is still slower compared to last year. In September, loans to individuals rose 9.2% against 17% in the same period last year, according to regulatory data.
“It is too early to start celebrating because a clearer picture of the bank’s financial health will not emerge until January-February,” said Jindal Haria, analyst at India Ratings.
Banks have also tightened their lending parameters, so personal lending growth is likely not to return to highs of 20% plus growth seen in previous years, Haria added.
Maintaining demand momentum beyond the holiday season will depend on containing COVID-19 and the resilience of lenders, rating agency Emkay Global said.
Reporting by Nupur Anand; Editing by Elaine Hardcastle