Consumer loans growth dips

KARACHI - The growth in consumer loans fell to 4.8 per cent during July-March FY08 compared with 11.8 per cent in the corresponding period last year amid increase interest rates.

According to the details, the consumer credit recorded net retirement in Q3-FY08 owing to the surge in interest rate played a pivotal role in restricting the demand for consumer loans during Jul- Mar FY08. Besides this, rising NPLs to loans ratio in almost all categories of consumer loans caused banks to become more vigilant while extending consumer credit. The impact of this restraint is more evident in auto loans, as one of the banks has even suspended the auto finance scheme.

It is worth mentioning here that the overall credit demand was strong despite a significant slowdown in credit growth to consumers during the same period under review.

According to SBP 3rd quarterly report for 2007-08, the share of consumer loans in the overall loans to private sector decelerated to 14.4 percent by end Mar 2008 compared to 15.4 percent in the corresponding period last year. This fact probably kept WALR from increasing sharply during Jul-Mar FY08, since consumer loans are high yielding advances.