Home loans fuel credit growth

MUMBAI: Bank loans have grown at 18.7% year-on-year by the end of September in the same pace as they did in the year-ago period. Loans to industry have marginally dipped, but banks have seen a sharp rise in retail loans, particularly home loans this year. Home loans given by banks saw a 15.7% increase to Rs 3,66,889 crore.

Private sector banks such as ICICI, HDFC Bank and Axis Bank have seen healthy growth in credit offtake in the period. ICICI Bank, the country’s largest private sector bank in second quarter saw a credit growth of 20%. “Retail loans have seen some moderation in growth.

For the bank, the growth in credit is largely from home loans, car and commercial vehicle and working capital loans,” said ICICI Bank managing director and chief executive Chanda Kochhar. “Corporates are refinancing existing high cost rupee loans.

They are drawing on past sanctions. Credit growth for the bank would be in the range of 18-19%. What one has to worry is if credit will continue to grow at the same pace one and a half years from now,” added Kochhar. The credit growth to industry has dipped to 22.9% as on September 23, 2011, to Rs 16,20,849 crore.

HDFC Bank executive director Paresh Sukthankar had said: “New project-related enquiry continues to be sluggish. Corporates continue to fund ongoing capex plans, however, refrain from making fresh investments.” The second-largest private sector bank has seen a credit growth of about 25%, driven largely by retail loans. Growth in credit is driven by loan given to commercial real estate and the NBFC sector.

Credit growth to NBFCs on a YoY basis in September 2011, grew at 46.2%, which was significantly higher than 18.5% in the previous year. Credit to commercial real estate sector increased 12.6 % in September 2011, higher than 7.9% in the previous year.

“We do expect some pick-up in the credit demand in the second half of the year, though not as much as the last fiscal. For the industry, credit growth should grow by 18%. The demand is likely to come from infrastructure, agriculture and the housing sector,” said DL Rawal, former chairman and managing director of Dena Bank.