Home and gold loans shine as personal loan portfolios shrink in new fiscal

Home loans and loans against gold jewellery have reported a positive growth in the first two months of 2021-22 as the personal loan outstanding of banks reported a drop. Home loans, which account for nearly a half of total personal loans in the country, grew 0.2% to Rs 14,62,029 crore as on May 21, gold jewellery loans have reported a 2.3% growth to Rs 62,101 crore, according to the Reserve Bank of India’s July bulletin published recently.

The data suggests that the enhanced activity in the housing sector in the last few months has continued through the new financial year. The stamp duty cuts announced by some state governments, unmet demand during the Covid-19 related restrictions and moderation in interest rates of housing loans have pushed up home sales, raising demand for home loans.

Similarly, higher gold prices have helped people raise funds by mortgaging their jewelleries as lockdowns in the second wave rendered many jobless and penniless.

Total personal loans as on May 21, 2021, stand at Rs 27,87,265 crore, 0.9% down from Rs 28,13,713 crore reported on March 26, as per the RBI data.

What does RBI data reveal?

RBI data reveals that other personal loans — consumer durables, advances against fixed deposits, advances to individuals against share and bonds, credit card outstanding, education loans, vehicle loans and other personal loans such as loan against property (LAP) — have all reported a negative growth in the two months of the current financial year.

It is surprising that credit card outstanding too dropped 10.4% to Rs 1,04,475 crore as on May 21, from Rs 1,16,537 crore reported on March 26, 2021. Other personal loans, which form an important part of the personal loan portfolio for banks, have reported a fall in growth at 1.6% to Rs 7,77,567 crore. The banks have become cautious about high-priced pure-play personal loans as delinquencies have risen in the past few months. Similarly, advances against fixed loans too slipped 7% to Rs 66,510 crore.

After running on the fast track in the second half of the previous fiscal, auto loans have gone on a slow track. They have shown a marginal dip of 0.6% to Rs 2,40,170 crore.

The overall gross bank credit has reported a fall of 1.1% to Rs 1,08,33,589 crore as on May 21, 2021.

What are bankers saying?

Bankers say the negative growth in credit offtake is on expected lines as people have postponed their purchase decisions in the wake of the second wave of a deadly pandemic.They believe the credit offtake is slowly picking up as economic activities gain momentum in the second quarter. They are unanimous in their take that the environment may turn bleak once again if a third wave strikes the country.