In Covid times, individuals are borrowing more than corporates now, shows RBI data

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The total borrowings in the personal loans segment have surpassed the corporate credit for the first time, according to the latest data from the Reserve Bank of India. As of July 30, the retail loans stood at Rs 28.58 lakh crore, while loans to industries stood at Rs 28.24 lakh crore, the RBI data showed.

Retail loans overtake corporate borrowings

This fact is being attributed to the reluctance of companies to borrow over the past one year since the outbreak of the Covid-19 pandemic, while individuals have been taking loans, benefiting from low-interest rates. According to a report published by credit rating agency Care Ratings, the overall credit growth is expected to be in the range of 7.5% to 8% in FY22. A low base effect, economic expansion, ECLGS or sovereign-guaranteed loan support and retail credit push could drive this growth.

The increased provisioning levels across banks amid the diminished corporate stress indicate towards a medium-term positive prospect. The retail loan segment is expected to do well as compared with industry and service segments, according to Care Ratings.

Brighter Future

A few bankers quoted by the Hindustan Times said that they believed that as the economy recovered from the shock of the second Covid-19 wave, the September and December quarters could see better corporate credit growth. The banks have a lineup of sanctioned loans for corporate borrowers, which will be drawn based on the pace of demand recovery, the HT report added, quoting bank officials.

While loans to companies remained low and only appreciated by 1% over the past year, among big businesses, loans actually shrunk by nearly 2.9%.

The retail loans outstanding have grown 11.2% from a year earlier as of July 30, with borrowers choosing to pawn gold jewellery and take personal loans, while credit against gold rose 77.4%, though on a low base, to Rs 62,412 crore as of July 30.

The State Bank of India chairperson Dinesh Khara on August 4, said they are not expecting much of a challenge in growing the retail book in FY22 either. Khara also spoke about the growing utilization in FY22 among commercial clients in certain sectors. “In certain sectors like iron and steel, there is an improvement in activities. We saw an under-utilization of about 30% last time when we met, but this time, in the commercial client group, it is 25%, a slight improvement,” Khara said, as quoted by the report.