Need for caution in retail lending: Assocham
Retail lending has increased by over 30% between March 2006 and March 2007, underscoring a need for caution, revealed an Assocham study.
By TNN |
NEW DELHI: Though the country’s financial sector does not have a subprime market, its retail lending has increased by over 30% between March 2006 and March 2007, underscoring a need for caution, revealed an Assocham study.
The findings show that the ICICI Bank’s advances to the retail sector had increased by 39% by March this year. Since Centurion Bank of Punjab had been focusing on the growth of retail banking, its advances to the retail sector account for 68% of net advances currently. While Punjab National Bank’s retail credit constitutes 22.7% of its net credit, the retail advances of the SBI constitutes 21.5% of total loan advances.
Commenting on the findings, Assocham president Venugopal Dhoot said: “In the backdrop of increased focus on retail strategy and volatility of the financial markets, banks need to be more cautious while making disbursements in the retail sector.”
Unlike in the US, there’s no subprime market in India. The US sub-prime market consists primarily of people with little or no credit worthiness. Though some players such as Citi Financial and Fullerton go through a personal screening of customers, this practice is not being followed by everyone. Hence, even though India is not exposed to subprime lending, the likely recession in the US market may affect the entire world economy.
Many commercial banks had increased retail lending by about 32% with a subsequent reduction of 13.75% in non-performing assets (NPAs) on a year-on-year basis during 2006-07. Though the Indian banks have significantly reduced their NPAs, the subprime mortgage crisis in the US may still be a cause of concern in India, the study said.
The findings show that the ICICI Bank’s advances to the retail sector had increased by 39% by March this year. Since Centurion Bank of Punjab had been focusing on the growth of retail banking, its advances to the retail sector account for 68% of net advances currently. While Punjab National Bank’s retail credit constitutes 22.7% of its net credit, the retail advances of the SBI constitutes 21.5% of total loan advances.
Commenting on the findings, Assocham president Venugopal Dhoot said: “In the backdrop of increased focus on retail strategy and volatility of the financial markets, banks need to be more cautious while making disbursements in the retail sector.”
Unlike in the US, there’s no subprime market in India. The US sub-prime market consists primarily of people with little or no credit worthiness. Though some players such as Citi Financial and Fullerton go through a personal screening of customers, this practice is not being followed by everyone. Hence, even though India is not exposed to subprime lending, the likely recession in the US market may affect the entire world economy.
Many commercial banks had increased retail lending by about 32% with a subsequent reduction of 13.75% in non-performing assets (NPAs) on a year-on-year basis during 2006-07. Though the Indian banks have significantly reduced their NPAs, the subprime mortgage crisis in the US may still be a cause of concern in India, the study said.
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