Data drive: Auto slowdown trips loan growth

Loan growth moderated for non-banking financial companies across the board with slowdown in auto and retail housing loans.

Loan growth has moderated to 12% year-on-year in the three months to June this year, as compared to 15% in the last quarter, due to slowdown in retail lending and weak flow of credit to small/medium businesses. In the retail segment, loan-growth moderated in the quarter ended June because of slowdown in auto and two-wheeler demand.

In fact, in the past few quarters, there has been gradual shift in the loan mix for most banks towards a higher share of retail loans. The shift has picked pace for most state-owned banks. Within retail, home loan growth was modest for most banks while unsecured loans were stronger. Corporate loans, too, remain modest as there is no traction in capex cycle. Most banks are focused on lending to better rated corporate segment. Loan growth moderated for non-banking financial companies across the board with slowdown in auto and retail housing loans.

Interestingly, in the three months to June, there was not any meaningful change on the overall asset quality ratios for public and private banks as there was no major resolution for the quarter. Gross non-performing loans (NPLs) was flat at 7.4% of loans with public sector banks reporting 9.7% of loans while private banks reported 4.1% of loans, according to an analysis by Kotak Institutional Equities Research report.

[“source=financialexpress”]