Credit disbursements by NBFCs likely to be slow due to the liquidity squeeze faced by them
KOLKATA, OCTOBER 23

Lending by banks to home, auto and consumer durables may witness a spike this festival season due to the slowdown in credit offtake by non-bank finance companies (NBFCs) on account of liquidity squeeze.

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Retail lending by banks and NBFCs witnesses a spike during the festival season, which extends from October to December.

According to industry experts, the festival season accounts for nearly 10-15 per cent of the annual volumes for retail loans, including home, consumer durables and other segments. In the case of two-wheelers and tractors, the share is much higher at nearly 25-30 per cent.

Hence, finance companies and banks come up with attractive schemes such as EMI waivers, cash backs, waiver of processing fees and interest rate cuts, among others, to grab a share of the pie.

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Funding constraints
A recent report by Credit Suisse points out that NBFCs are likely to face severe funding constraints on account of near-term maturity of commercial papers (Cps) subscribed to by mutual funds. Hence, liquidity is likely to be tight during the festival period.

“Given the liquidity constraints, credit disbursements by NBFCs (barring a few) have been slow in September and October, and is likely to remain so during the remaining part of the third quarter. Banks, which are sitting on comfortable liquidity, can take advantage of this,” Karthik Srinivasan, Senior Vice-president, ICRA, told BusinessLine. Kotak Mahindra Bank, for instance, is expecting 10-15 per cent growth in retail lending during the October-December period this year, backed by advances to home, personal, credit card and consumer durables segments.

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As on June 2018, retail, including home loan, loan against property, small business, personal loan and credit cards, accounts for nearly 34 per cent of the bank’s standalone advances, which stood at ?1,76,927 crore. “We have a fairly aggressive plan on the retail front. We are rolling out attractive customer offers with partners such as Reliance Digital, paytm Mall, Jabong, Big Basket and Goibibo, among others, and are expecting good growth in retail lending this year,” said Ambuj Chandna, Senior Executive Vice-president & Head – Consumer Assets, Kotak Mahindra Bank.

The slowdown in corporate credit offtake is also likely to motivate banks to push aggressively retail advances to grow its loan book, said Jaikishan J parmar, Research Analyst, Angel Broking.

Kolkata-based United Bank of India is expecting to disburse close to ?800-900 crore during the festival period.

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“We have rolled out a retail campaign for mortgage-backed assets such as home and auto loans; we are looking at 20 per cent growth in retail credit offtake this year,” said Ashok Kumar pradhan, MD&CEO, United Bank.