personal finance

Retail loans to double to Rs 96 trillion in 5 years: Report


The retail loan book of financiers in India will double to Rs 96 lakh crore by March 2024, compared with Rs. 48 trillion in March 2019, according to an ICICI Bank-CRISIL report.

According to the report, this rapid growth will take place on the back of increased demand for private consumption (namely home, car, consumer durables, credit cards and so on), willingness of consumers to take loans, increased availability of various consumer data, improved usage of data analytics and regulatory initiatives propelling growth in low cost housing loans and Micro, Small and Medium Enterprises (MSME) loans.

“We think that five pillars that are going to support expansion of the market are: (1) greater information availability progressively reducing the risk in lending (2) lower costs for customers due to intensifying competition (3) regulatory and government initiatives (such as the proposed public credit registry, loan co-origination by banks and non-banking financial companies, boost to affordable housing and ironing out of glitches in lending to MSMEs) (4) five-fold increase in digital lending to Rs. 15 trillion, wherein loans are sourced, underwritten and sanctioned digitally, lowering costs for financiers, and (5) reduction in operating costs due to greater usage of technology and data analytics which will, in turn, boost profitability,” said Anup Bagchi, Executive Director, ICICI Bank.

Report highlights

According to the highlights of the report, Mining the Golden Opportunity in Retail Loans, the main segment contributors for the growth are as follows:

  • Mortgage loans market-normal and low cost housing and loan against property-is expected to double to Rs 46.1 lakh crore in FY24
  • Unsecured loans — personal loans and credit cards – to more than double to Rs 13.8 lakh crore in FY24
  • Loans to MSMEs are likely to more than double to Rs 13.2 lakh crore
  • Vehicles-commercial vehicle, four and two-wheeler-loans are tipped to nearly double to Rs 17.5 lakh crore.

“Growth is expected to be higher in smaller cities outside the top 50 cities. We expect players with a strong funding franchise, distribution heft, superior underwriting skills, strong focus on technology and balanced mix of secured and unsecured loans to be ahead of the pack in the retail loans sweepstakes. The top five players are foreseen continuing their dominance of the market, across asset classes. For example, in housing loans, despite the market having over 100 players, the top five players alone have a cumulative market share of over 50 percent,” said Amish Mehta, Chief Operating Officer and President, CRISIL.

What are the growth drivers?

  • Enhancing focus on digitisation of ownership of land records and providing access to the same to financial institutions with requisite consent,
  • Greater thrust on digital payments,
  • Developing industry-wide standards on key aspects such as innovation hub & environment, data security, customer privacy, consumer protection and loan pricing

Further, new private banks are also expected to gain market share from their public sector peers. Additionally, the entry of new types of players is likely in the market targeting specific segments, in line with global trends, according to the report.

Retail loan trends in terms of volumes

  • Large upsurge of nearly 108 million retail loan accounts is estimated to be added annually for next five years.
  • Currently, it is estimated that on an average 60 million retail loans accounts are added annually in the country
  • Loan accounts for consumer durables, two-wheelers, personal loans and credit cards to contribute maximum to volumes (in sequential order) that will be added annually. Together, they will add an estimated 96 million accounts annually.
  • Of the above, around 53 million loans is projected to be disbursed annually for consumer durables itself.
  • Further, on an average, an additional 4.5 million housing units are likely to be funded annually for next five years.
  • Nearly six million units of commercial vehicle and four wheelers are also tipped to fund each year.





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