Home loans drive Indian banks’ retail books

The loan book of Indian banks has grown primarily due to a surge in retail borrowings. An analysis of state-wise retail lending data shows borrowings are rising across geographies.

The share of states in the bottom half of the market has gone up from 44% of the total borrowings in 2013-14 to 49% in 2023-24. Three states together account for more than half of all retail loans disbursed by banks, show the data.

While Maharashtra and Delhi remained the top two for the last ten years, Gujarat replaced Tamil Nadu as the third largest state in terms of retail borrowing from fiscal 2020-21.

The Reserve Bank of India classifies lending for home purchase, consumer durable loans, vehicle loans, credit card outstanding and unsecured loans as retail loans.

The banking sector’s share in retail loans has gone up from 18% in 2013-14 to 31% last fiscal year, after excluding the impact of the HDFC-HDFC Bank merger. Home loans account for a bulk of these loans — 47% in FY24, excluding the merger impact of HDFC and HDFC Bank.

Because of this, demand for retail loans has been higher where home sales have surged, and home prices are high. Maharashtra accounts for almost a quarter of the banking sector’s retail loan portfolio

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