New Delhi: Though the home loan segment is yet to regain their position after the rate increase, retail loans are well on their path to recovery. The growth rate for such loan, which had fallen to a single digit for most part of 2007 have shown improving trends with major banks witnessing a growth of 10-15 percent in the retail loan segment.

This festive season saw almost all the major players slashing their retail loan rates and offering discounts on processing fee. The purpose of the entire exercise was to catch the festive rush. The segments, which witnessed a good performance were auto loan, two-wheeler loan, consumer durable loan and to an extent personal loans.

Mid-October was the turning point for this segment. However, the gamble of banks didn't pay off completely as they were expecting a major off take in home loans because it was this segment, which was given the major rebates and discounts. In some cases the rates on home loans were even dropped by as much as 50 basis points. The ongoing high property prices, which are still prohibitive are seen as the main cause of this sluggish performance of home loan segment.

The growth in retail loan segment can be largely attributed to the reduction in interest rates and other charges by the banks. Will this continue after the increase in CRR by Reserve Bank of India (RBI) is an open question. Though, no bank has raised its interest rates after the CRR increase, but many banks are feeling the pinch, and in an effort to improve their margins, have started to reduce deposit rates. If past is any indication of future, the banks must further reduce the interest rates on various retail loans if they want to continue the momentum.