Higher interest rates seem to have impacted investment expenditure more than consumption expenditure, going by the second quarter results of select banks.
Most of the private banks that have declared results so far have reported higher growth in retail advances, as compared to corporate or wholesale advances.
There is still demand for home and car loans, as people's incomes have kept pace with rising prices. But companies seem to have put on hold capacity expansion plans given the uncertain economic and high interest rate scenarios, said bankers.
Another reason for banks to focus on retail loans is the higher yields they offer vis-à-vis corporate loans.
HDFC Bank saw a higher growth in retail loans in the just ended quarter. But there have been no new proposals on the corporate side for capital expenditure. At this point retail is outpacing corporate loans, said Mr Paresh Sukthankar, Executive Director, HDFC Bank.
“Most of the growth on the corporate side was driven by working capital. All capex or term loans were those that were tied up some time back,” he said. The sequential (July-September quarter versus April-June quarter) growth in loans was 7 per cent, of which, retail loans grew by 9 per cent and corporate loans grew by 4 per cent.
Auto, home loans
Despite the hike in interest rates, the demand for retail loans, such as auto and home loans, has not dropped as much as they should have, probably because people's incomes have also increased. So, they probably feel they are able to afford the high interest rates, Mr Sukthankar said.
Gross advances grew 25.6 per cent year-on–year to Rs 1,89,917 crore, as on September-end 2011. As compared to this, retail loans grew by 34.2 per cent to Rs 92,878 crore.
IndusInd Bank saw its consumer finance advances grow by 44 per cent to Rs 14,081 crore, year-on-year and 11 per cent quarter-on-quarter. As against this, corporate and commercial banking loans grew by 17 per cent to Rs 16,054 crore year-on-year and by 2 per cent quarter-on-quarter.
“We have moved to high yielding consumer finance loans, where the yields are above 16 per cent,” said Mr Romesh Sobti, Managing Director, IndusInd Bank.
For Axis Bank, retail advances grew by 40 per cent to Rs 29,328 crore in the quarter ended September from Rs 20,997 crore in the year-ago period.
As against this, loans to the large and mid-corporate segment grew 25 per cent to Rs 79,390 crore (Rs 63,706 crore) and to SMEs by 23 per cent to Rs 20,755 crore (Rs 16,812 crore).
The growth in retail loans over the June-ended quarter was 8.5 per cent and in corporate loans, 6 per cent.
“We expect the retail loan book to keep up the pace as there is demand for home and auto loans,” said Mr Somnath Sengupta, Executive Director, Axis Bank.
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