Retail financing by commercial banks in India.

Kar, Sushanta Kumar ; Arunachalam, R.

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.

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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. Those macro variables include per capita income, NSDP at current prices, literacy rate (2001), average population per bank branch and share of industry and employment in organised sector. The variables used for this purpose are given in Table 1.

There are a few studies that deal with retail financing by banks in India. The work of Gopinath (2005) (5) focuses on the opportunities and challenges of retail banking in India. The work of Kamesam (2004) (6) refers to the challenges ahead in the distribution channels in rural-urban India. Prakash Neetu (2006) (7) observes that retail banking in India is very small when compared to developed economies. While Prasad (2005) (8) observes that retail banking in India is yet to grow to its full potential, Mukharjee (2007) (9) in her recent book on retail banking focuses on the directions of giving retail credit and method of recovery.

I. STATE LEVEL TRENDS IN RETAIL LOANS

Before we proceed with the detailed analysis of the bank retail loans, we may identify those states and UTs that are higher than the national average in terms of selected macroeconomic parameters and those states and UTs that are lower than the national average in terms of the same macroeconomic parameters. For the purpose of our analysis we have taken per capita NSDP at current prices and literacy rate (2001 census) to find out which are developed and those that are less developed. Incidentally for most of the states/UTs, these two figures fall in the same range, i.e., either above the national average or below the national average barring a few exceptions. The Table 1 shows the macroeconomic aggregates. For the purpose of this paper, we will indicate those states/ UTs as relatively less developed which have both per capita NSDP at current prices as well as literacy rate less than the respective national average and vice versa. The contents/findings of Table I will be used when states/UTs are referred to as relatively developed or less developed in the subsequent sections.

Total Retail Loans

Table 2 shows, across states and union territories, the total retail loan as a percentage of total bank credit given in each state / union territory separately for the years 2002 to 2006. For the purpose of uniformity over the years, the recently formed states have not been considered individually and thus Bihar and Jharkhand, Uttar Pradesh and Uttarkhand as well as Madhya Pradesh and Chhatisgarh have been combined. The table also shows in general an uptrend in retail loans in almost all states between 2002 and 2006 barring a few states.

As per our findings, contrary to common perception that the developed states would have greater share in the retail loan as a percentage to total loans in the state (because the wealthy persons may go for more personal assets), it is the states in the North East, which are in the highest band. Significantly, Manipur and Mizoram continue to be part of the top five over all the five years from 2002 to 2006. The five states in the lowest range in terms of total retail loans as a percentage to total bank loans in the state are mostly developed states in India. Interestingly again, Maharashtra, Delhi and Gujarat continue to be in the lowest range over the five years (2002-2006).

In terms of growth rate of retail loans as on 2006 over 2002, the data reveals a different result. The growth in total retail loans as a percentage of total loans has been more in the developed states like Maharashtra, Haryana and Delhi while it lags behind in less developed states like Orissa and Tripura. Significantly, the growth rate has been the highest in Assam, again a less developed north-eastern state, while a developed state like Karnataka lags behind in the growth of retail loans. The poor growth in Jammu and Kashmir may be perhaps attributed to other socio-political factors.

We now turn to the analysis of components of retail loans such as housing, consumer durable and vehicle loans.

Table 3 shows the state-wise details of housing loan as a percentage of total retail loans in respective states between 2002 and 2006. We also notice that the position of states across the different years has not changed. The states Mizoram, Maharashtra, Orissa, Kerala and Sikkim continue to occupy the top five positions in housing loans as a percentage of total retail loans, disbursed in respective states, over the years. On the other hand the states like Goa, Meghalaya, Tripura, Arunachal Pradesh and Nagaland continue to be placed in the lowest five positions.

Contrary to earlier findings on the total retail loan as a percentage to total bank credit where the states in the north east were occupying the top positions, it may be observed that in housing as a percentage of total retail loans they go down to the bottom except the state of Mizoram. In other words, the retail loans in those states were other than housing.

However, the data above reveals that although it is natural for the states like Maharashtra and Kerala to be in the top five in the housing loan as a percentage of total retail loans because of the real estate boom there, the other three surprise entries are states like Mizoram, Orissa and Sikkim. And to repeat, all these states continue to occupy the top five positions over the five years (2002-06). The reason behind such growth and the relation with state domestic product, employment, education and spread of bank offices is examined later.

The growth of housing loans have been faster in less developed states like Jharkhand and Bihar, Assam and Rajasthan vis-a-vis other states apart from the developed states of Delhi and Gujarat. On the other hand, four north-eastern states Mizoram, Tripura, Arunachal Pradesh and Nagaland have lagged behind in the growth of housing loans. The poor growth of housing loans in Haryana is surprising given the growth of real estate in the national capital region and the peripheral areas. The possibility of alternative sources of finances rather than bank loans in this region needs to be examined.

Consumer Durable Loans

Table 4 reveals the percentage of consumer durable loan as a percentage of total retail loans across various states and union territories in India separately, for each state, for the years 2002-2006. As observed earlier, while in the case of total retail loan as a percentage to total hank credit, the states in the north-east were occupying the top positions, in the case of housing loan as a percentage of total loans, they go down to the bottom except the state of Mizoram. However, once again, in the case of consumer durables as a percentage of total retail loans, the states in the north-east, namely, Tripura, Nagaland, Arunachal Pradesh, Mizoram and Manipur, Dadra and Jammu and Kashmir feature among the top in these five years. Very significantly, in case of Tripura, consumer durable as a percentage of total retail loan is highest among all the states in all these years and the percentage is more than three to four times of the percentage of the next state in that order. This shows that the avenue for retail loans is concentrated for consumer durables, in these states and more prominently in the state of Tripura.

It may be seen from the above table that consumer durable loan as a percentage of total retail loans are again lowest in the developed states like Tamil Nadu, Karnataka, Maharashtra, Punjab, Gujarat and Haryana contrary to popular perception that there would be more demand for consumer durable loans in these states due to higher level of per capita disposable income. As already stated earlier, the states of Maharashtra, Orissa and Kerala continue to occupy the top five positions in housing loans as a percentage of total retail loans over the years. That may also explain the lower share of consumer durable in the total retail loans. However there has been a swing from the highest band to the lowest band for the states like Meghalaya and Arunachal Pradesh from the year 2002 to 2005, the reason for which is not very clear. Possibly, it shows a shift in bank finance from consumer durables in these states to other components of the retail loans.

However, when we examine the data from the perspective of growth of consumer durable loans as a percentage of total retail loans over the last five years from 2002 to 2006, we arrive at the following state-wise results.

Very significantly, the growth rates have been negative in all the states when we take consumer durable loans as a percentage of total retail loans. So the popular perception that there has been an increase in the demand for consumer durable loans with the growth of economy and increasing purchasing power of people leading to acquisition of more personal assets through bank loans is not true at least so far as consumer durables are concerned. The increasing disposable income has perhaps led to less reliance on bank loans for the purpose of consumer durables or the emphasis has shifted to other components of retail loans such as housing or vehicles, which will be examined in the next section. The other possible reason could also be the fall in the price of consumer durables with the financial sector reforms and the entry of multinational companies into these products infusing competition among the market participants. The third possible reason is alternative sources of finance other than bank loans.

Next, let us turn to the state-wise position vis-a-vis vehicle loans.

Table 5 brings out the percentage of vehicle loan as a percentage of total retail loans given across various states and union territories in India for the years 2002-2006. Analysis of the above data shows that in terms of vehicle loans as a percentage of total retail loans, the lowest band consists of the less developed states like Orissa, Tripura and Jharkhand and Bihar over all the five years on expected lines. This can however also be explained by the fact that the states of Mizoram, Orissa and Sikkim continue to occupy the top five positions in housing loans as a percentage of total retail loans over the years, which has probably reduced the share of other retail loans.

On the other hand, the highest band of five states consists of the developed states like Gujarat, Punjab, Tamil Nadu, Maharashtra and Delhi on expected lines. Arunachal Pradesh in the higher band again, is an exception, which explains the earlier findings of an extreme swing leading to the drastic reduction in the share of consumer durables loan as a percentage of total retail loans in that area over the years. Thus, there has been a shift from consumer durables to vehicle loans in that state as a preferred retail loan over the years. Besides, in developed states, the demand for vehicle loans is expected to be higher owing to technological advantage, average life span of vehicles and so on.

In terms of the growth of the vehicle loans as a percentage of total retail loans over the years 2002 to 2005, the findings are that Orissa lead the growth of vehicle loans as a percentage of total retail loan followed by Rajasthan, Jammu and Kashmir, Jharkhand and Bihar all of whom are not developed states contrary to perception that more vehicle loans are disbursed in developed areas. On the other hand, Tamil Nadu, Punjab, Haryana and Delhi are in the lowest band. In fact the growth of vehicle loans in developed areas of Delhi and Chandigarh, has been negative over the years. Again, the alternative sources of finances other than bank finances (for example, the presence of large NBFC like Sundaram Finance financing vehicle in Tamil Nadu) need to be seen.

Bank Group-wise Disbursal of loans

The table 6 below gives the bank group-wise disbursal of total retail loans over the years 2002 to 2006 all over India.

As may be observed from the table the highest share is that of the nationalized banks followed by SBI and its associates in disbursal of total retail loans. It may also be observed that while the share of foreign banks, RRBs, nationalized banks, SBI and its associates have come down over the years, the share of other scheduled commercial banks, viz., the private banks has drastically gone up from nine per cent in 2002 to nearly 30 per cent in 2006. The most significant fall in the share of total retail loans has been in the case of nationalized banks-by nearly 11 per cent, i.e., from 45 per cent to 34 per cent. That indicates a significant shift in the bank group-wise financing of retail loans from public sector banks, especially nationalized bank to private banks in India while the share of foreign banks in the retail loan segment continues to be negligible and urban-centric. The reason could be probably the more customer-friendly and market savvy approach by private sector banks.

When we analyse the bank group-wise and state-wise total retail loans over the years 2002 to 2006, the following picture emerges. Foreign banks have presence in India in the retail loans segment in twenty-six states and union territories. However, except for Delhi, Karnataka, Tamil Nadu and Maharashtra, all developed states, their contribution in the total retail loans over the years in other places have been very small. More importantly, even in these states as well as other states, the share of foreign banks in the total retail loans has gone down over the years (except for 2006). This is perhaps because of the acute competition foreign banks are facing from the private sector banks and nationalized banks in the retail loan segments. The nationalized banks are present in thirty-two states and union territories in the retail loans segment. Significantly, in twenty-two states and union territories, their share is more than 30 per cent of the total retail loans in 2006. However, their share is also declining in the total retail loans over 2002 to 2006. In fact among the states and UTs listed above, the nationalized banks had contributed to more than half of the total retail loans in nine states in 2002, which has drastically come down to only one state (Haryana--51.71 per cent) in 2006.

The private sector banks have their presence in 32 states and union territories in the retail loans segment. Their share is 30 per cent or more in retail loans vis-a-vis other bank groups in nine states compared to twenty-two states in case of nationalized banks in 2006. However, what is clearly noticeable is that their share has gone up in all the states in total retail loans from 2002 to 2006 except in the north-eastern states of Manipur, Meghalaya and Mizoram, where it is very negligible. In fact their share was more than 30 per cent of the total retail loan in only one state, in 2002, which has gone up to more than 30 per cent of the total retail loan in nine states in 2006. Thus they are competing with the nationalized banks and SBI and associates for the market share in retail loan segment.

The RRBs are also present in the retail loans segment in twenty-seven states and union territories. In fact they have a sizeable contribution in the north-eastern states of Tripura, Assam and Mizoram apart from Orissa.

The State Bank of India and its associates, as expected, encompass 32 states and union territories in the retail loans segment. They have more than 30 per cent of the share of retail loans in nineteen states and union territories in 2006 (nineteen also in 2002) and in fact their share is 50 per cent or more in ton states and union territories in 2006 (as compared to six in 2002). Therefore, it does not appear that there has been any dent in the shares of SBI and associate, may be because of their sheer size and branch network, in the total retail loan segment. In fact their share has increased from 2002 to 2006 in the north-eastern states like Arunachal Pradesh, Assam, Manipur, Meghalaya, Nagaland and Tripura. Similarly their share also has increased in the less developed states like Jammu and Kashmir, Madhya Pradesh and Chhatisgarh, Jharkhand and Bihar and Rajasthan, reflecting positively regarding the developmental role played by the State Bank group in the areas ignored by private sector and other banks.

SECTION II

This section deals with the regression analysis to determine the effect of macroeconomic parameters such as per capita net state domestic product, organized sector employment, level of industrialization, literacy rate and number of bank offices all over India on the total as well as various components of retail financing by banks.

The representative figures taken on the dependent variable (Y) and independent variables (X) are given below. For the purpose of uniformity and data availability, the analysis is confined to a cross section of one year 2004. The dependent variables representing the bank finances are:

Y1 = Total Retail Lean as a percentage to total bank credit in each state and UT, 2004

Y2 = Housing Loan as a percentage to total retail loan in each state and UT, 2004

Y3 = Consumer Durable Loan as a percentage to total retail loan in each state and UT, 2004

Y4 = Vehicle Lean as a percentage to total retail loan in each state and UT, 2004 The independent variables in the form of the macroeconomic aggregates are represented by

[X.sub.1] = Spread of bank branch network all over India = Average Population per bank branch end June, 2004

[X.sub.2] = Level of Industrialization = State-wise Contribution of Industry in Net State Domestic Product at Factor Cost at Current Prices (Rs Cr), 2004

[X.sub.3] = Per Capita Income=State-wise per capita Net State Domestic Product at Factor Cost at Current Prices, 2004

[X.sub.4] = Education Level=Literacy Rate (percentage)

[X.sub.5] = Employment in the Organized Sector=State-wise employment in the organized sector (in thousand), March, 2004

The above analysis (Tables 7a and 7b) shows that only the average population per bank branch has a significant impact on the retail loans disbursed by banks as a percentage to total bank credit. Apart from literacy rate, which is comparatively more significant, the impact of per capita net state domestic product, organized sector employment and the level of industrialization, i.e., share of industry in the net state domestic product on the retail loans disbursed by banks were not found to be significant. The R square value at 0.693 also explains the moderate impact of all these variables in explaining the variation of total retail loans given across the states as a percentage to total loans.

In the case of housing, as the above analysis shows, per capita net state domestic product, literacy rate and the level of industrialization i.e., share of industry in the net state domestic product have a significant impact on the housing loans disbursed by banks as a percentage to total retail loan. Comparatively, the impact of the average population per bank branch and the organized sector employment, on the housing loans disbursed by banks were found to be negligible. The high R square value at 0.820 explains the high impact of all the relevant variables in explaining the variation in the amount of housing loans given across the states as a percentage to total retail loans.

The above analysis (Tables 9a and 9b) shows that only the average population per bank branch has a significant impact on the consumer durable loans disbursed by banks as a percentage to total retail loan. The impact of literacy rate, per capita net state domestic product, organized sector employment and the level of industrialization, i.e., share of industry in the net state domestic product on the consumer durable loans disbursed by banks were found to be negligible. However, the R square value at 0.584 signifies that these variables only have the moderate impact on the variation of dependent variable. There could be other significant variable such as interest rate, cultural factors, and access to consumer durable products etc., which might be affecting the dependent variable.

The analysis (Tables 10 a & b) shows that none of the independent variables, i.e., average population per bank branch, literacy rate, per capita net state domestic product, net state domestic product, organized sector employment and the level of industrialization have any significant impact on the vehicle loans disbursed by banks as a percentage to total retail loan. The moderate R square value at 0.494 also mean that there could be other factors that explain the share of vehicle loans in total retail loans in each state.

We may now summarise the findings as regards the influence of macroeconomic aggregates on different components of retail loans.

III. CONCLUSIONS

Auto loans experienced the highest growth, followed by other personal loans (comprising loans mainly to professionals and for educational purposes) and housing finance in 2005-06. However, housing has already got a larger base and as a percentage of total retail credit, housing loans constituted 50.36 and 47.67 per cent in 2005 and 2006 respectively. Housing loans is growing at an annual average rate of 47.7 per cent during the five-year period from 2000-01 to 2004-05. The share of housing loans increased steadily from 2.7 per cent of total loans of commercial banks at end-March 1991 to 11.0 per cent at end-March 2005. As per state-wise data also growth of housing loan is more vis-a-vis other components of retail finances.

A significant conclusion in the analysis on state-wise retail finance data is that although retail loan as percentage of total bank credit and various components of retail loans (within the state) as percentage of total retail loans are less in developed states, in absolute terms they are very high in these states. Therefore, when taken as the percentage of retail / vehicle/consumer durable or housing loans disbursed all over India, the four developed states of Maharashtra, Delhi, Karnataka and Tamil Nadu take a lion's share. Since overall bank credit is also high in these states (as seen from high CD ratio), the share of retail loan as a percentage of total bank credit was found to be low in these states. It may not be out of place to assume that such an anomaly is visible mainly due to the reason that bank credit to other segments (other than retail credit) is very large in these developed states and hence the share of retail loan segment when viewed as a per cent of total bank credit seems to be low. The reverse is true in the case of less developed states. Since other avenues of bank credit (other than the retail loans) are lower, this category of loans form a relatively higher share in the bank loans disbursed in the less developed states.

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 education level at the macro level.

The reasons for the above findings could be summarised as follows.

(a) On an all India basis significant relationships between quantum of retail finances and macroeconomic aggregates are absent due to skewed distribution of retail finances by banks--state / district / bank / region-wise.

(b) In case of secondary as well as primary data relating to the borrowers concerned in housing loans segment, these economic variables play a pivotal role in determining the amount of loans they avail from the banks due to the importance of housing vis-a-vis other segments of the retail loans.

(c) The availability of alternate sources of vehicle/housing finance other than commercial banks also plays a role. Commercial banks are not alone in housing finance in India and the housing finance companies play a significant role in this segment apart from the cooperative institutions. In addition, the recent policy of the Government to promote housing as part of infrastructure development and also the concessions offered by Reserve Bank of India in the form of low risk weights and inclusion in Priority Sector Advances, etc., is well exploited by private sector banks, of course taking greater risk.

SUSHANTA KUMAR KAR

Central Bank of Oman, RUWI, Sultanate of Oman

R. ARUNACHALAM

University of Madras, Chennai, India

Notes

This work is based on the Ph.D. thesis of the first author done under the guidance of the second author. Disaggregated Basic Statistical Returns (BSR) data, obtained from Reserve Bank of India for the purpose of thesis work is used by the authors along with other published information where necessary. The analysis and conclusions are that of the authors and not of their respective institutions.

(1.) Report on Currency and Finance (2005-06), Reserve Bank of India, p. 141.

(2.) Sharma, Manoranjan: Retail Banking: Effective Instruments of Transformation, canbank.co.in

(3.) Wherever year is used, data pertains to end-March figures in each year unless otherwise specified.

(4.) Report on the Trend and Progress of Banking in India (2005-06), Reserve Bank of India, p. 67.

(5.) Gopinath, Shyamala (2005), Retail Banking Directions: Opportunities and Challenges, IBA-Banking Frontier International Conference, Mumbai.

(6.) Kamesam, Vepa (2004), Retail Banking: Challenges Ahead in Distribution Channels in Rural/ Urban India, Reserve Bank of India, Mumbai.

(7.) Prakash, Neetu (2006), Retail Banking in India, Professional Banker (July), ICFAI Press, pp. 59-65.

(8.) Prasad Chowdary, Mohanty Biswajit, Nazkani Umesh (2005): Paper presented at National Conference on Management of Emerging Sectors: New Paradigms and Perspectives, TPA Management Institute, Manipal.

(9.) Mukherjee, D. D. (2007), Retail lending, Credit Monitoring, Documentation and Recovery Management.

Table 1
Macroeconomic Aggregates **

                                Average
                              Population                  Per Capita
                               per bank       Share of      NSDP at
                              branch in     Industry *      current
State/UT                      end-June *       (Rs Cr)     prices *

Andaman and Nicobar Islands           14            NA         28340
Andhra Pradesh                        15          25514        21372
Arunachal Pradesh                     20           80.1        17393
Assam                                 23         5633.3        12821
Bihar                                 21         1422.5         5780
Chandigarh                             5          666.5        60105
Delhi                                 10           7044        51664
Goa                                    5         2740.5        58677
Gujarat                               14          43426        26979
Haryana                               13        15657.9        29504
Himachal Pradesh                       9         2809.2        25059
Jammu and Kashmir                     13          425.2        15318
Karnataka                             11          22366        21696
Kerala                                10         8770.3        24492
Madhya Pradesh                        19          14618        14011
Maharashtra                           15          58338        29204
Manipur                               37          308.9        14766
Meghalaya                             15          409.8        18135
Mizoram                               14            NA         22207
Nagaland                              27            NA         20746
Pondicherry                           15         2399.1        50936
Punjab                                 9        11306.5        28607
Rajasthan                             17        15383.5        15486
Sikkim                                13             72        22062
Tamil Nadu                            13        27067.1        23358
Tripura                               24            NA         18676
Uttar Pradesh                         21          24506        10637
West Bengal                           19          23079        20896
All India                             16         510389        20989

                                            Employment
                                           in Organised
                                                Sector
State/UT                      Literacy #      (000) ##

Andaman and Nicobar Islands         81.3           37.6
Andhra Pradesh                      60.5         2064.7
Arunachal Pradesh                   54.3            NA
Assam                               63.3         1097.2
Bihar                                 47          527.1
Chandigarh                          81.9           90.2
Delhi                               81.7            839
Goa                                   82           53.2
Gujarat                             69.1           1622
Haryana                             67.9            651
Himachal Pradesh                    76.5          297.2
Jammu and Kashmir                   55.5          210.1
Karnataka                           66.6         1820.3
Kerala                              90.9         1204.4
Madhya Pradesh                      63.7           1098
Maharashtra                         76.9         3563.9
Manipur                               66           80.6
Meghalaya                           62.6           81.9
Mizoram                             88.8           41.5
Nagaland                            66.6           71.3
Pondicherry                         81.2           56.4
Punjab                              69.7          825.6
Rajasthan                           60.4         1176.9
Sikkim                              68.8            NA
Tamil Nadu                          73.5         2281.7
Tripura                             73.2          123.3
Uttar Pradesh                       56.3         2124.6
West Bengal                         68.6         2000.3
All India                           64.8        26442.7

Chhatisgarh, Jharkhand and Uttarkhand are merged in the parent state.

Per capita NSDP of Andaman and Nicobar Islands, Tripura, Mizoram and
Nagaland are of 2002-03

Sources: * Handbook of Statistics on the Indian Economy, Reserve Bank
of India, 2004-05

** As indicated in this Handbook, owing to differences in methodology
of compilation, data for different States/Union Territories are not
strictly comparable

# = Census of India, 2001,

## = Quarterly Employment Statistics, March, 2004, Ministry of
Labour, Government of India

Table 2
State-wise Details of Total Retail Loans as Percentage of Bank Credit

State                  2002    2003    2004    2005    2006     Growth

Andaman And Nicobar    8.13   10.17   22.15   32.43   24.22      49.48
Andhra Pradesh        17.20   21.19   26.10   28.30   28.58      16.54
Arunachal Pradesh     23.23   30.51   38.78   42.96   44.01      22.36
Assam                 11.81   21.48   32.58   35.78   38.32      56.12
Chandigarh             5.92    7.39   15.45   19.30   23.08      72.47
Dadra                  1.35    2.36    4.00    4.78    5.95      85.19
Daman                  2.44    4.33    9.68    9.19   10.60      83.61
Delhi                  8.15    9.82   13.29   15.19   17.02      27.21
Goa                   17.38   20.08   27.83   28.24   29.59      17.56
Gujarat                8.70    9.90   14.75   16.69   18.13      27.10
Haryana               13.86   16.40   19.68   22.96   29.08      27.45
Himachal Pradesh      19.81   19.04   21.34   21.49   26.04       7.86
Jammu And Kashmir     16.27   19.00   20.96   19.53   21.44       7.94
Jharkhand And Bihar   20.36   23.62   31.97   31.57   32.63      15.07
Karnataka             19.48   21.50   27.12   29.87   30.02      13.53
Kerala                24.24   27.19   33.82   37.60   37.42      13.59
Lakshadweep           39.68   46.65   50.00   41.20   39.55      -0.08
Maharashtra            7.00    8.57   13.83   15.75   16.38      33.50
Manipur               31.42   42.49   52.99   48.93   52.65      16.89
Meghalaya             19.87   17.59   24.46   28.23   33.84      17.58
Mizoram               32.62   51.96   54.36   49.63   61.51      22.14
MP and Chhatishgarh   15.53   18.83   24.91   25.52   26.83      18.19
Nagaland              21.19   30.69   38.72   47.28   49.27      33.13
Orissa                22.89   23.36   33.76   31.59   31.44       9.34
Pondicherry           20.53   25.43   30.75   36.64   39.32      22.88
Punjab                13.32   16.54   22.15   26.67   27.37      26.37
Rajasthan             18.10   20.46   25.34   25.57   28.11      13.83
Sikkim                30.95   41.28   55.54   69.03   62.24      25.27
Tamil Nadu            14.57   18.89   23.77   24.13   25.71      19.11
Tripura               29.71   32.98   37.22   40.37   43.19      11.34
UP and Uttarkhand     16.09   18.51   25.71   27.82   28.73      19.64
West Bengal           12.82   14.45   17.29   20.91   22.82      19.50

Source: Based on Basic Statistical Returns, Reserve Bank of India

Table 3
State-wise Distribution of Housing Loan as Percentage of Total Retail
Loans

State                  2002    2003    2004    2005    2006   Growth *

Nagaland              14.01   10.99   14.85   11.22   10.51      13.62
Arunachal Pradesh     17.22   12.96   19.11   26.38   16.87      15.76
Tripura               21.59   21.39   24.82   26.42   25.74      21.35
Daman                 26.96   21.65   28.14   29.05   34.41      23.72
Meghalaya             26.98   24.97   31.86   30.28   35.35      25.62
Goa                   27.78   28.06   32.99   32.82   37.04      27.25
Jammu and Kashmir     28.65   31.76   34.18   37.45   38.61      29.14
Delhi                 29.43   32.16   36.56   41.33   40.15      29.93
Chandigarh            30.10   33.75   36.99   41.55   40.49      30.95
Jharkhand and Bihar   30.35   35.26   37.67   41.77   42.27      31.49
Pondicherry           32.05   35.73   40.87   42.13   43.05      33.13
Assam                 32.71   38.23   40.99   42.94   44.77      34.21
Manipur               33.86   39.38   41.30   43.15   45.09      35.34
Andaman and Nicobar   34.48   40.52   41.94   44.94   45.66      36.16
Himachal Pradesh      35.65   40.86   42.78   45.95   46.31      37.06
Haryana               37.66   41.24   44.25   46.20   46.84      38.61
Andhra Pradesh        37.88   41.60   44.58   47.07   47.20      38.88
Karnataka             37.93   41.83   44.68   48.28   48.14      38.86
UP and Uttarkhand     38.15   41.96   44.73   50.37   48.85      38.94
West Bengal           38.82   43.49   45.27   50.38   50.46      39.75
Punjab                39.76   43.67   45.37   50.97   50.70      40.37
MP and Chhatishgarh   40.33   43.82   46.44   50.99   51.84      40.78
Tamil Nadu            40.51   44.08   46.81   51.26   51.96      41.04
Dadra                 41.71   44.25   49.56   51.78   52.94      42.15
Gujarat               41.73   44.78   50.52   53.11   56.85      41.92
Rajasthan             42.35   45.99   50.57   53.19   57.14      42.71
Sikkim                44.69   46.62   51.71   54.22   57.40      44.51
Kerala                45.19   48.23   53.46   55.22   59.20      45.45
Lakshadweep           45.78   49.39   56.15   58.94   61.53      46.34
Orissa                47.24   49.76   56.71   60.57   63.22      47.20
Maharashtra           47.80   53.02   61.60   60.85   64.42      49.38
Mizoram               57.25   63.43   70.07   67.36   70.81      59.52
Growth Average                                                   36.29

Source: Based on Basic Statistical Returns, Reserve Bank of India

* Growth indicates simple growth rate

Table 4
State-wise Details of Consumer Durable Loan as Percentage of Total
Retail Loans

State                  2002    2003    2001    2005    2006   Growth *

Andaman and Nicobar    5.33    3.18    2.71    1.33    3.01     -10.88
Andhra Pradesh         3.89    3.13    2.76    2.47    2.39      -9.64
Arunachal Pradesh     11.60    9.14    4.03    0.91    1.81     -21.10
Assam                  9.06    4.44    4.21    3.80    3.57     -15.15
Chandigarh             4.51    2.71    0.97    2.31    0.58     -21.78
Dadra                 11.77    5.32    2.24    1.00    0.70     -23.51
Daman                  6.26    4.64    1.31    1.07    1.18     -20.29
Delhi                  1.64    1.32    1.28    2.16    0.97     -10.21
Goa                    3.64    2.61    2.04    3.46    1.45     -15.04
Gujarat                2.57    2.34    1.76    4.61    0.98     -15.47
Haryana                4.51    2.82    2.01    1.80    1.23     -18.18
Himachal Pradesh       5.94    4.17    2.19    1.72    1.69     -17.89
Jammu and Kashmir     10.64    7.98    4.60    4.16    4.02     -15.55
Jharkhand and Bihar    6.24    3.93    4.04    2.12    2.24     -16.03
Karnataka              3.43    2.48    1.97    2.31    1.86     -11.44
Kerala                 2.95    2.11    1.82    2.16    2.63      -2.71
Lakshadweep           10.38   14.55   15.88    9.19    6.31      -9.80
Maharashtra            2.33    1.71    1.70    1.93    1.64      -7.40
Manipur                7.48    6.57    4.96    3.30    2.21     -17.61
Meghalaya              9.77    6.67    2.04    0.73    1.62     -20.85
Mizoram                8.52    7.17    6.40    3.65    2.84     -16.67
MP and Chhatishgarh    6.06    4.76    3.70    3.02    3.17     -11.92
Nagaland              10.41    9.48    6.33    5.18    4.16     -15.01
Orissa                 3.49    2.22    1.85    1.39    1.78     -12.25
Pondicherry            4.19    2.46    1.79    4.37    1.96     -13.31
Punjab                 3.52    2.00    1.73    1.91    1.00     -17.90
Rajasthan              4.44    3.81    1.79    3.10    0.99     -19.43
Sikkim                 6.46    4.81    2.47    4.09    4.01      -9.48
Tamil Nadu             3.55    2.07    2.33    2.21    1.94     -11.34
Tripura               31.10   34.14   33.98   28.13   19.66      -9.20
UP and Uttarkhand      4.61    3.20    2.24    2.45    2.00     -14.15
West Bengal            6.63    5.94    5.28    4.11    3.14     -13.16
Growth Average                                                  -14.51

Source: Based on Basic Statistical Returns, Reserve Bank of India

* Growth indicates simple growth rate

Table 5
State-wise Details of Vehicle Loan as Percentage of Total Retail Loans

State                  2002    2003    2004    2005    2006   Growth *

Andaman and Nicobar    5.49    7.91    8.86   11.87   11.97      29.51
Andhra Pradesh         3.86    4.07    5.90    6.13    7.42      23.06
Arunachal Pradesh      5.19    6.47   10.47   12.06   14.57      45.18
Assam                  6.78    6.22    6.99    6.63      10      11.87
Chandigarh            19.08   15.97   13.03   11.95   14.23      -6.35
Dadra                  7.14    7.75   10.78    5.05   14.15      24.54
Daman                  8.49   26.76    42.6   20.37   18.45      29.33
Delhi                 21.37   15.55   16.32   15.37    15.2      -7.22
Goa                    8.71   10.53   18.92   16.93   21.16      35.73
Gujarat                6.78    9.16   13.14    9.23   13.15      23.49
Haryana                6.24    5.78    7.62   10.25    8.26       8.09
Himachal Pradesh       5.53    5.31    7.58    8.02     8.7      14.33
Jammu and Kashmir      5.59    7.03   11.99   15.82   17.11      51.52
Jharkhand and Bihar    2.14    3.66    6.27    4.49    6.22      47.66
Karnataka              4.88    5.35     6.3    6.61    7.20      11.89
Kerala                 5.38    6.33   10.27    7.43    9.83      20.68
Lakshadweep            0.97    0.81    1.78     1.8     1.7      18.81
Maharashtra            6.24     7.2    9.06   12.82   14.34      32.45
Manipur                4.48    3.46    3.32    6.93    5.73       6.98
Meghalaya              4.12    5.58    6.42    4.54    4.46       2.06
Mizoram                 2.9    0.66    1.42    1.98    4.08      10.17
MP and Chhatishgarh    4.07    4.73    7.43    7.58    9.23      31.70
Nagaland               3.89    3.58     4.3    6.89    6.89      19.28
Orissa                 1.16    1.94    3.42     6.4    9.25     174.35
Pondicherry            3.75    4.84    7.44     7.9   11.62      52.47
Punjab                 8.92    9.38   11.88    11.4   12.01       8.66
Rajasthan              3.13     3.6    11.1    11.4   12.72      76.60
Sikkim                 1.89     1.4    1.91    4.56    6.03      54.76
Tamil Nadu             5.46    7.58   12.40    6.79    7.36       8.70
Tripura                 1.2    1.28    1.55    2.15    2.45      26.04
UP and Uttarkhand      3.97    4.37    8.95    8.35     9.6      35.45
West Bengal            5.94    4.98    8.16   12.23   13.72      32.74
Growth Average                                                   29.83

Source: Based on Basic Statistical Returns, Reserve Bank of India

* Growth indicates simple growth rate

Table 6
Bank Group-wise details of Total Retail Loan from 2002-2006

(Figures in %)

Bank Group                                  2002      2003      2004

Foreign Banks                              13.77     13.87      9.36
Nationalised Banks                         44.85     43.34     38.73
Other Public Sector Banks                   0.00      0.00      0.00
Other Scheduled Commercial Banks            8.78     10.31     24.12
Regional Rural Banks                        5.38      4.90      3.73
State Bank of India and its Associates     27.21     27.58     24.07
Total Retail Loans in the year            100.00    100.00    100.00

Bank Group                                  2005      2006

Foreign Banks                               9.36      9.79
Nationalised Banks                         34.08     34.22
Other Public Sector Banks                   0.00      0.03
Other Scheduled Commercial Banks           28.11     29.65
Regional Rural Banks                        3.04      2.33
State Bank of India and its Associates     25.40     23.98
Total Retail Loans in the year            100.00    100.00

Source: Based on Basic Statistical Returns, Reserve Bank of India

Table 7(a)
Regression Results of Factors affecting Retail Loans

                        Unstandardized    Standardized
                         Coefficients     Coefficients

                                   Std.
Model                     B       Error       Beta        T     Sig.

1 (Constant)            -.274     12.002                 -.023  .982
  APPBO                  .817       .235      .631       3.481  .003
  Industrialisation      .000       .000     -.429      -1.227  .237
  Percapita nsdp         .000       .000     -.355      -1.327  .203
  Literacy               .339       .190      .400       1.781  .094
  OrganisedEmp          -.001       .004     -.102       -.278  .785

(a) Dependent Variable: Total retail

Table 7(b)
Model Summary of Regression

                                                       Std. Error of
Sig.          F     R Square     Adjusted R Square      the Estimate

.001      7.229         .693                  .597           5.68916

Table (8a)
Regression Results of Factors affecting Housing Loans

                        Unstandardized    Standardized
                         Coefficients     Coefficients

                                   Std.
Model                     B       Error       Beta        T     Sig.

1 (Constant)            14.841    7.193                  2.063  .056
  APPBO                   .044     .141       .044        .314  .758
  Industrialisation       .000     .000       .741       2.769  .014
  Percapita SDP           .000     .000      -.638      -3.110  .007
  Literacy                .449     .114       .678       3.938  .001
  Organised Emp           .000     .002      -.052       -.184  .856

(a) Dependent Variable: Housing

Table (8b)
Model Summary of Regression

                                                       Std. Error of
Sig.          F     R Square     Adjusted R Square      the Estimate

.000      14.56         .820                  .764           3.40971

Table 9(a)
Regression Results of Factors affecting Consumer Durable Loans

                        Unstandardized    Standardized
                         Coefficients     Coefficients

                                   Std.
Model                     B       Error       Beta        T     Sig.

1 (Constant)               2.880  1.955                  1.473  .160
  APPBO                     .091   .038       .501       2.373  .031
  Industrialisation   -3.79E-005   .000      -.459      -1.128  .276
  Percapitansdp       -1.21E-005   .000      -.149       -.479  .639
  Literacy                 -.017   .031      -.143       -.545  .594
  OrganisedEmp              .000   .001       .272        .632  .536

(a) Dependent Variable: Consumer durable

Table 9(b)
Model Summary of Regression

                                                       Std. Error of
Sig.          F     R Square     Adjusted R Square      the Estimate

0.10      4.485         .584                  .453            .92657

Table 10(a)
Regression Results of Factors affecting Vehicle Loans

                        Unstandardized    Standardized
                         Coefficients     Coefficients

                                   Std.
Model                     B       Error       Beta        T     Sig.

1 (Constant)             11.803   6.208                  1.901  .075
  APPBO                   -.195    .121      -.374      -1.608  .127
  Industrialisation   1.96E-005    .000       .082        .184  .856
  Percapitansdp            .000    .000       .507       1.475  .160
  Literacy                -.044    .098      -.130       -.451  .658
  OrganisedEmp             .000    .002       .029        .060  .953

(a) Dependent Variable: Vehicle

Table 10(b)
Model Summary of Regression

                                                       Std. Error of
Sig.          F     R Square     Adjusted R Square      the Estimate

0.037     3.124         .494                  .336           2.94266

Table 11
Summary Findings of All Constituents of Retail Loans Secondary Data

                    Significant
Category of Loan    variables              Not significant Variables

Total Retail Loan   Average population     Per Capita Net state
                    per bank offices       Domestic Product, Organised
                                           sector employment, Level of
                                           industrialization, Literacy
                                           rate

Housing Loan        Per Capita Net state   Organised sector
                    Domestic Product,      employment, Average
                    Level of               population per bank offices
                    industrialization,
                    Literacy rate

Consumer Durable    Average population     Per Capita Net state
Loan                per bank offices       Domestic Product, Organised
                                           sector employment, Level of
                                           industrialization, Literacy
                                           rate

Vehicle Loan        None                   Average population per bank
                                           offices, Per Capita Net
                                           state Domestic Product,
                                           Organised sector
                                           employment, Level of
                                           industrialization, Literacy
                                           rate