Retail Financing by Commercial Banks in India

By Kar, Sushanta Kumar; Arunachalam, R. | Indian Journal of Economics and Business, March 2010 | Go to article overview

Retail Financing by Commercial Banks in India


Kar, Sushanta Kumar, Arunachalam, R., Indian Journal of Economics and Business


Abstract

The credit given by commercial banks to the retail sector comprising housing loan, vehicle loan, consumer durable loan, credit card advances and personal loans during the period of financial deregulation, especially in early 2000 up to 2006 was pronounced. This work is an attempt to throw light on the distribution of various constituents of retail finance by commercial banks in different states of India and to examine the nexus between the volume of retail finance made by banks to different states and some of the selected macro variables. Due to this skewed nature of disbursal of bank finances all over India, no significant relationship could be arrived between 'state-wise total retail loans, consumer durable loans and vehicle loans' with 'state-wise macroeconomic aggregates such as per capita net state domestic product, level of education, level of industrialization and employment in the organized sector: Only in case of housing loans, there are significant impacts of the level of industrialization, per capita net state domestic product and level of education.

**********

The credit given by commercial banks to the retail sector comprising housing loan, vehicle loan, consumer durable loan, credit card advances and personal loans during the period of financial deregulation, especially in early 2000 up to 2006 was pronounced. Buoyant growth of business, diversified business portfolio and higher profitability increased retail lending by banks in India in the last few years at compounded annual growth rate of more than 40 per cent (1) have been the prime drivers of credit growth in recent years. Retail loans constituted 9.9 per cent of GDP in India in 2005-06 vis-a-vis 27.5 per cent for the emerging Asian countries, 12.1 per cent in emerging European countries and 58 per cent in the case of matured markets such as United States, Australia, Germany, France and Japan. Exploitation of the latent globalisation (think global, act local) potential requires robust growth in retail loans (2).

Credit to retail sector as a per cent of gross advance increased from 22 per cent in 2004 (3) to 25.5 per cent in 2006. Among the constituents of retail loans, housing loan accounted for 50 per cent in 2004-05 and 36 per cent in 2005-06. Auto loans increased from 13 per cent in 2005 to 16 per cent in 2006. Other personal loans accounted for 32 per cent in 2005 and 2006 (4). The basic causes for the growth of retail financing are economic prosperity measured in terms of constant higher economic growth, domestic savings predominated by household sector savings which surged from 25 per cent of GDP in 1999-2000 to 32 per cent in 2005-06, consumer demographics where 70 per cent of the population below 35 years of age with greater propensity to consume, technological factors including debit cards, internet and phone banking, anywhere and anytime banking, declining rate of interest in early years of this decade and financial disintermediation by corporate units including shares and debentures, public deposits collected straight, and strategic investments. In addition, the change in regulatory policy of the Reserve Bank of India and the role of the Government in er-couraging housing also accounted for the greater increase in the growth of retail banking.

This work is an attempt to throw light on the distribution of various constituents of retail finance by commercial banks in different states of India and to examine the nexus between the volume of retail finance made by banks to different states and some of the selected macro variables. The data for this analysis is collected from Basic Statistical Returns (BSR) submitted by banks to RBI, other published sources of the RBI, Census of India and the Government of India. This analysis is made in respect of states and union territories, which are higher than national averages as well as lower than national averages in terms of selected macro variables.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Retail Financing by Commercial Banks in India
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.