What portion of your salary should you spend on loan EMIs?
Most people buy a house or a car by taking a loan from the bank, but do you know what is the maximum portion of your salary that you should spend on EMI? What is the 40 percent EMI rule? What are the disadvantages of spending more on EMIs? Among home loan, personal loan, auto loan and credit card bills, which loan should you eliminate first?
Retail loans, including housing and vehicles, recorded a nearly 12% growth in June compared to 10.4% in June last year. Credit given for financing farming and allied activities also saw an expansion of 11.4%.
Prospects of good monsoon
The growth in retail and agriculture loans hint at increased economic activities after relaxations in lockdown across states. While the rise in retail loans is primarily on account of a jump in gold loans, credit growth in the agricultural sector is reflective of better harvest in the rabi season and prospects of a good monsoon for the third year in a row.
In June 2019 (the pre-pandemic phase) the growth in retail credit on a YoY basis was 16.6%.
Credit growth in MSMEs
According to the data of the Reserve Bank of India (RBI), credit growth in the industry and services sector, however, declined. The overall credit growth in the industrial segment contracted by 0.3%.
In June, Micro and small units saw credit growth go up by 6.4% as compared to 2.9% shrinkage in June 2020. As per a SIDBI-TransUnion CIBIL report, the credit demand by MSMEs peaked and almost touched pre-pandemic levels in June.
This recovery comes after a dip in loan queries in April-May when the second wave of the pandemic was ravaging through India. CIBIL also added that the credit inquiries index stood at 95 in June. It was 139 in March, after which it tumbled to 67 in April before hitting 75 in May.
Bankers said as far as the retail bank credit is concerned, there will be an upward shift in the July-September quarter. This will be mainly due to economic activity picking up pace owing to ease in curbs and more focus on the economy.