Banks' retail loan portfolio affected due to recession in rural areas

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Mumbai, Ta. August 16, 2019, Friday

The slowdown in the economy, especially in the rural areas, is likely to affect banks' retail loan portfolios in the current quarter. According to the top executives of some public sector banks, the retail loan segment is likely to increase in the current quarter due to tensions in agriculture and micro, small and medium enterprises (MSMEs).

Stress in agriculture and MSME segments is now catching up. There is scope for additional financing in agriculture, but in the case of MSMEs, we are taking more care and keeping the investigation site high, ”said a chief executive of a public sector bank.

Banks have been placing more emphasis on retail loans due to tensions in the corporate loan sector over the past few quarters. Retail loans include MSMEs, agricultural and personal loan segments.

Retail lending, especially in the MSME and agriculture, is witnessing a slowdown in the economy. In most sectors, including retail, repairs have an impact on capacity. When loan waiver was announced for agriculture sector, credit withdrawal in agriculture sector continued to decline.

"We are going to the farmers to repay the loans provided in the agriculture sector and they are being asked to repay," said another bank official. According to the Reserve Bank data, the credit growth of the agricultural sector was negative at 5.7 percent by May of the current fiscal year.

Tractor sales have also declined due to the recession. In the June quarter, banks saw a significant increase in NPAs in agriculture.

Currency loans have a higher share of NPAs in the MSME sector.

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