By Abhyjith K. A | October 17, 2023

Retail loans are likely to grow at a slower pace next year as demand for unsecured loans is expected to saturate in the coming months, according to banking experts.

The growth in retail loans is projected to be 10% in the next year as compared to a 30% growth this year as demand for working capital is increasing, said Anubhuti Sahay, Head of South Asia Economic Research at Standard Chartered Bank.

RBI had cautioned the banks about retail credit growth, calling it an outlier. Retail loans grew at a much faster rate than any other loans.

“Banks figured that retail loans were lesser risky compared to corporate loans,” said Arjun Nagarajan, Chief Economist at Sundaram Asset Management Company Ltd.

The pent-up demand for retail loans for the last two years surfaced in 2022, and these backlogs are continuing in 2023 also, said B. Anandaraj, Deputy Vice President at State Bank of India Ltd. “The demand will come down in 2024.”

Banks will now focus on offering more corporate loans which will translate to a 10-12% growth in corporate credit, said Anandaraj.