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Wednesday, October 28, 2020

Amid slow credit offtake, banks aim to woo more retail borrowers

While banks are averse to go for risky project loans, lenders led by State Bank of India (SBI), HDFC Bank and ICICI Bank have already announced plans to push retail credit hoping that purchases held back during the lockdown will now lead to a pent-up demand.

Written by George Mathew | Mumbai | Updated: October 5, 2020 11:12:09 am
Covid pandemic, indian economy, Indian banks, festival offers, credit offtake, economy news, Indian express newsThe retail push by banks follows a deceleration in non-food bank credit growth to 6.0 per cent in August 2020 from 9.8 per cent in August 2019. (Representational)

Banks are gearing up with various festival offers to woo retail customers at a time when the-19 Covid pandemic is still raging across the country and credit offtake has remained sluggish. While banks are averse to go for risky project loans, lenders led by State Bank of India (SBI), HDFC Bank and ICICI Bank have already announced plans to push retail credit hoping that purchases held back during the lockdown will now lead to a pent-up demand.

The retail push by banks follows a deceleration in non-food bank credit growth to 6.0 per cent in August 2020 from 9.8 per cent in August 2019. During the March-August period, overall credit outstanding fell by Rs 165,217 crore to Rs 90,46,327 crore and personal loans fell by Rs 5,539 crore amid the uncertainty caused by Covid-19 along with lockdowns imposed on the containment zones to curb the spread of the virus.

The economic uncertainty has caused banks and consumers to take a cautious approach to borrowing. “However, this also resulted in a level of pent-up demand, which our analysis shows has now started to come through. Although not back to the pre-Covid levels seen in January and February 2020, inquiry volumes have started to recover from their troughs in April and May 2020, and in July and August 2020 were similar to levels seen during the same period in 2018,” credit information bureau TransUnion Cibil said.

HDFC Bank has launched ‘Festive Treats’ where customers can avail of special deals on all banking products from loans to bank accounts, with 1,000 plus offers from leading players and over 2,000 hyper local offers via tie-ups with local merchants across semi urban and rural locations, it says.

In light of the unprecedented situation due to Covid-19, all deals and offers this year can also be availed of digitally from the safety customers’ homes, in addition to over the counter at branches, partner stores and dealerships.

It expects mobiles, consumer durables, and electronics categories to do well, in addition to apparels, jewellery and dining-in due to the festive season.

SBI has announced a 100 per cent waiver in processing fee for all customers applying for car, gold, and personal loan through YONO app. It has also offered the lowest interest rate starting from 7.5 per cent to customers opting for car loan and100 per cent on-road finance on select models. “There would be a complete waiver on processing fees on home loans for homebuyers in approved projects. The bank is also providing special concessions up to 10 bps on the interest rate for the customers based on their credit score and loan amount,” it said.

Additionally, homebuyers can avail 5 basis points interest concession if they apply for a home loan via YONO, it said. For gold loan customers, it has offered flexible repayment options for up to 36 months at an interest rate of 7.5 per cent. The state-run bank is offering personal loans with lending rates as low as 9.6 per cent.

CS Setty, MD (Retail & Digital Banking), SBI said, “With the economy recovering gradually, we hope to see a boost in consumer spends and at the same time ensure SBI’s helping hand to all those in addressing their financial needs to have a pleasant festive season.”

“Consumers have held back on purchases during the lockdown and there is a lot of pent up demand that has built up in the system,” said Parag Rao, country head—payment business, merchant acquiring services and marketing, HDFC Bank.

“In the past 2-3 months we have seen renewed customer interest and buying patterns. We see this continuing through the festive season as well,” he said.

ICICI Bank too unveiled a host of schemes, including attractive interest rate (repo rate linked) starting from 6.90 per cent and processing fee starting from Rs 3,000; EMIs starting at Rs 1,554 per Rs one lakh for a tenure of 84 months on auto loans; and EMI of Rs 36 per Rs 1,000 for tenure of 36 months on two-wheeler loans. It has also offered interest rates starting from 10.50 per cent on personal loans and no cost EMI on consumer durables.

Credit growth remains slow despite availability of liquidity in the banking system along with rate cuts by banks leading to lower interest rates for fresh loans (reduction in interest rates of 127 bps as compared with August 2019), a report Care Ratings said. “Banks are being very selective with their credit portfolios due to asset quality concerns and the overall bank credit is expected to remain slower in the near term,” it said.

The growth in retail/personal loan segment bounced back in July 2020, and on a year-on-year basis, it registered a growth of 11.2 per cent. However in August 2020, the growth rate in retail/personal loan segment contracted to 10.6 per cent. In absolute terms, it has increased from Rs 25.3 lakh crore on July 31, 2020 to Rs 25.4 lakh crore on August 28, 2020.

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