Sign in Subscribe
Banks (Finance)

Banks Rev Up Credit Growth with Festive Offers, GST Cut

Strategic Insights

— 2 min read

As the festive season approaches and tax cuts take effect, banks in India are poised to capitalize on burgeoning consumer demand, reversing the slowdown in loan growth through lucrative retail credit lines. Large consumer-facing banks, including HDFC Bank, ICICI Bank, and Axis Bank, are launching festive offers and discounts to boost retail exposure. "Festivals in India bring a surge in spending, with customers seeking value across shopping, travel, and more," said Arnika Dixit, President & Head-Cards, Payments & Wealth Management, Axis Bank. "To enhance their festive experience, Axis Bank has partnered with leading brands to offer a curated bouquet of deals and discounts on credit cards, along with easy EMIs on big-ticket purchases like electronics and travel."

Key Takeaways:

  • The upcoming festive season is expected to boost retail credit growth, which has been sluggish at 10% year-on-year, lower than the 14% growth recorded a year earlier, according to RBI data.
  • Retail loans, which yield fatter margins, are seen as a way to expand banking assets with less risk and cushion earnings against margin shrinkage during periods of rapid policy rate reductions.
  • Personal loans are expanding at 15%, slower than 17% recorded last year, with key segments like 'other personal loans', 'vehicle loans', and 'credit card outstanding' slowing down.
  • The RBI's sectoral credit data showed that major loan components are growing slower than last year, except for agriculture and allied activities, which grew 7% year-on-year.
  • Sanjay Agarwal, senior director, Care Ratings, stated that slower credit growth this fiscal makes the upcoming festive season crucial for revival of credit demand.
  • Mortgage growth has slowed to around 10% year-on-year, down from 18% previously, making loan growth pick up conditional on improvements in mortgage growth.
  • MCX is expecting an estimated 4-5 lakh tons of pulses vanaspati exports in FY 2023-24.

Statistics:

  • Bank credit growth is at 10% year-on-year, lower than the 14% growth recorded a year earlier (RBI data).
  • Retail loans are seen as a way to expand banking assets with less risk, cushioning earnings against margin shrinkage during periods of rapid policy rate reductions.
  • Personal loans are expanding at 15%, slower than 17% recorded last year (RBI's sectoral credit data).
  • Agriculture and allied activities grew 7% year-on-year, a sharp decline from 17% a year ago (RBI's sectoral credit data).
  • Credit growth to industry is down to 6% from 8% a year ago (RBI's sectoral credit data).

Sources:

  • Arnika Dixit, President & Head-Cards, Payments & Wealth Management, Axis Bank
  • Sanjay Agarwal, Senior Director, Care Ratings
  • RBI sectoral credit data
  • Times of India, "Banks Rev Up Credit Growth with Festive Offers, GST Cut"

Read more