Personal loans grow 15.2% after regular hike in interest rates

Despite high interest rates, rising disposable incomes and affordability is leading to high growth in personal loans. According to the sectoral data on bank credit as on September 23, released by the Reserve Bank of India (RBI), personal loans have grown by 15.2 % at a significantly higher rate compared to the growth of 8.6 % as on September 24, 2010.

Personal loan outstanding as on September 23 stood at Rs 7,08,526 cr. The data is taken from select 47 scheduled commercial banks accounting for about 95 % of the total non-food credit deployed by all scheduled commercial banks. Most of the components of personal loans such as housing, advances against fixed deposits, advances to individuals against shares, bonds and vehicle loans registered accelerated growth.

Home loan (including priority sector housing) have grown 15.7 %, against 10.2 % during corresponding period last year. As on September 23, total outstanding to housing sector stood at Rs 3,66,889 cr, accounting for almost half of total personal loans.
Vehicle loans grew at 19.3 %, while advances to individuals against bonds and shares grew 24.3 %. Similarly, advances against fixed deposits grew at 17.5 % to Rs 60,392 cr as on September 23.

Credit card outstanding stood at Rs 18,907 cr as on September 2011 compared with Rs 18,509 cr in September 2010, a growth of 2.2 % compared to negative growth of 23.7 % in September last year.

Sumit Bali, executive vice-president (retail assets), Kotak Bank, said, “This year, we are finding historically low delinquency level. Spends are 25 % higher this year compared to last year. We will issue 60-65 % more credit cards than what we issued last year.”
Bali adds, “This year has been good in terms of wage hikes. Also, financial institutions can make good decisions about borrowers due to credit bureaus. Last year, the unsecured collections were in a challenging environment as we were out of the credit crisis.”

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