Retail bank credit, the flagship segment of bank credit in India, is losing steam as the pandemic leaves behind a trail of jobs lost, while others exercise caution about making purchases. The only silver lining is the boost in the growth of vehicle loans, with people preferring a private mode of transport.

Retail loans have grown a mere 9.3% higher until 23 October 2020 than the same period last year. This is a sharp fall from the same time last year when it was growing at 17.2% higher than the previous year, according to the latest data released by the Reserve Bank of India (RBI).

Both companies and retail borrowers are trying to stay debt-free, leading to a slowing of bank credit. Total bank credit grew 5.5% over the previous year to Rs 92.13 lakh crore, while in the year-ago period the growth was 8.4%.

Though most of the large public and private sector banks have reported huge growth in home loans, the RBI data suggests that the growth may be concentrated on few large players. Housing loans, which were the fastest-growing segment, also saw a sharp drop in growth to 8.2% until 23 October 2020 over the previous period to Rs 13.73 lakh crore. In the year-ago period the home loans were growing at 19.4% over the previous year.

Growing the unsecured book comprising credit cards and personal loans for high yields was a strategy that private banks like Axis Bank and HDFC Bank had adopted. But banks certainly seem to have turned cautious with the outstanding on credit cards growing only by 4.9% to Rs 1,10,207 crore over the previous year as against a growth of 25.9% reported for the same time last year. While HDFC Bank continues to push its unsecured loans like credit cards and personal loans, Axis Bank is cautious on unsecured debt.

Most banks have reported a robust growth in vehicle loans. Among retail loans only vehicle loans have grown higher than the year-ago period as people these days prefer travelling by their private vehicles either a four-wheeler or a two-wheeler. In keeping with the demand, many banks have started financing second-hand cars. Vehicle loans have grown 8.4% higher to Rs 2,24,022 crore over the previous year, when the growth was 5%.

The demand for personal loans, which was also a fast-growing segment for most banks, has dimmed with the year-on-year growth slipping to 14.3% to Rs 7,63,917 crore. In the year-ago period these loans were growing at the rate of 22%.

Loans for consumer durables was another fast-growing segment. Though the loan outstandings are small, these loans have also contracted sharply. The year-on-year growth for consumer durable loans was down to Rs 6,881 crore, growing at the rate of 23.8%. In the year-ago period these loans were growing at 70% over the previous period.

The deceleration in the growth of education loans has been partially arrested. Study loans are now degrowing at the rate of 2.7% to Rs 65,432 crore, while in the year-ago period it was degrowing at 3%. But due to the high levels of non-performing assets (NPAs) banks, banks in the private sector have been slow in disbursing education loans.