Over the next five years, the retail loan book of financiers in India would double to Rs. 96 lakh crore, according to a study by ICICI Bank and ratings agency Crisil. The rapid growth would be driven by higher willingness of consumers to take out loans, greater availability of customer data and higher usage of data analytics, among other factors.
Titled ‘Mining the golden opportunity in retail loans’, the report, which was released on Tuesday, said that the doubling of the retail loan book is expected by March 2024. Retail advances grew from Rs. 22 lakh crore in FY14 to Rs. 48 lakh crore by March 2019. Anup Bagchi, executive director, ICICI Bank said, “In a way, it took five years to double. It looks like it would take (another) five years to double again. Essentially, it means we are imputing a CAGR of 14-15% for doubling.”
The study has identified ‘five pillars’ that would drive the growth in the retail segment — greater availability of information that reduces risk in lending, lower costs for customers due to higher competition, regulatory and government initiatives, loan co-origination by banks and NBFCs, a projected five-fold increase in digital lending, and a reduction in operating costs due to greater usage of technology and data analytics. The report says that India’s per capita GDP, which stands at $7,762, is close to China’s per capita GDP in 2008. The study said that this junction will prove to be an inflection point for the country, as it was with China a decade ago.
The report was created based on interviews with 200 experts from the retail loans industry and consumer research with 3,100 individuals across 10 cities, and used data from public sources and proprietary sources of ICICI Bank and Crisil. The study estimates that the digital lending would increase five-fold from Rs. 2.7 lakh crore to Rs. 15 lakh crore, increasing its share from 6% of retail loans currently to 16% over the next five years. Bagchi said that the availability of information, comprising GST, and other measures, including the past 4-5 years, had increased confidence in lending.
Among various segments, value growth in personal loans, credit cards and consumer durable loans are expected to grow at a much faster pace at 23%, 22% and 21% CAGR respectively from FY19-24, compared to low-ticket housing loans (16%), two-wheeler loans (16%), MSME (15%), loan against property (15%) and normal housing loans (14%), commercial vehicle finance (14%), passenger vehicle finance (14%), education loans (10%) and gold (7%).
Amish Mehta, chief operating officer and president, Crisil, said that locations outside the top 50 cities would contribute to higher growth.