Amid slow credit offtake, banks aim to woo more retail borrowers

Banks are gearing up with a variety of festival offers to attract retail customers during the ongoing Covid-19 pandemic, which has kept credit off-take sluggish. While banks are cautious about venturing into risky project loans, major lenders such as the State Bank of India (SBI), HDFC Bank, and ICICI Bank have already unveiled plans to boost retail credit. They anticipate a surge in demand as purchases, delayed during lockdowns, are expected to materialize.

The increased focus on retail by banks comes in response to a slowdown in non-food bank credit growth, which dropped to 6.0 percent in August 2020 from 9.8 percent in August 2019. The period from March to August witnessed an overall credit decline of Rs 165,217 crore to Rs 90,46,327 crore. Personal loans decreased by Rs 5,539 crore during this time, influenced by the uncertainties arising from the Covid-19 pandemic and associated lockdowns.

The cautious borrowing approach by banks and consumers due to economic uncertainty has resulted in a pent-up demand, as suggested by analysis. While not fully rebounded to pre-Covid levels of January and February 2020, inquiry volumes in July and August 2020 were comparable to those in 2018.

HDFC Bank’s ‘Festive Treats’ initiative offers special deals on various banking products, encompassing loans to bank accounts. These include over 1,000 offers from leading players and over 2,000 hyper-local deals through partnerships with local merchants in semi-urban and rural areas. Amid the Covid-19 situation, all deals and offers can be accessed digitally, ensuring safety for customers.

SBI, on the other hand, introduced a 100 percent waiver in processing fees for car, gold, and personal loans via its YONO app. The bank also offered the lowest interest rates starting from 7.5 percent for car loans and 100 percent on-road finance for select models. Homebuyers in approved projects benefit from a complete waiver on processing fees for home loans, along with special concessions on interest rates based on credit score and loan amount.

ICICI Bank has presented a range of schemes, including attractive interest rates starting from 6.90 percent, processing fees starting from Rs 3,000, and competitive EMIs on auto loans and two-wheeler loans. The bank is also offering interest rates starting from 10.50 percent on personal loans and no-cost EMIs on consumer durables.

Despite liquidity availability and rate cuts, credit growth remains slow, with banks being selective due to asset quality concerns. The retail/personal loan segment experienced a rebound in July 2020 with a year-on-year growth of 11.2 percent, but the growth rate contracted to 10.6 percent in August 2020. Absolute terms increased from Rs 25.3 lakh crore on July 31, 2020, to Rs 25.4 lakh crore on August 28, 2020.