Retail credit will continue to drive Indian bank growth

Demand from the corporate sector will continue to remain weak, however.

The Reserve Bank of India, the central bank, said retail loans rose by 13.5% in February compared to an increase of 12.2% in February 2012.

Analysts said Indian banks will once again count on retail credit in the current financial year to drive credit growth as demand from the corporate sector remains soft.

In the previous financial year, banks had focused on retail credit as corporate credit demand slowed amidst an economy growing at its slowest pace in a decade.

Pratip Chaudhuri, chairman of the State Bank of India, said retail credit will largely drive credit growth.

“We at (SBI) are focusing a lot on home and car loans,” he said.

Punjab National Bank also said it will be retail credit which will drive growth. It noted that positive steps are being taken to boost the corporate sector, which will pick up in the future.

RBI data also show credit to industry increased 14.7% in February compared to the increase of 19.1% in February 2012.

Indian retail credit penetration is still among the lowest in the world and fares poorly even in comparison with some of the other emerging economies such as China, Russia and Brazil.