instituted had played a major role in this market. housing credit has increased substantially over last few years, but from a very low base. during the period 1993 - 2004, outstanding housing loans by scheduled commercial banks and housing finance companies grew at a trend rate of 23 per cent. the share of housing loans in total non - food credit of scheduled commercial banks has increased from about 3 per cent in 1992 - 93 to about 7 per cent in 2003 - 04. recent data reveal that non - priority sector housing loans outstanding as on february 18, 2005 were around rs. 74 thousand crore, which is, however, only 8. 0 per cent of the gross bank credit. as already pointed out, direct housing loans up to rs. 15 lakh irrespective of the location now qualify as priority sector lending ; housing loans are understood to form a large component of such lending. in addition, housing credit is also being provided by housing finance companies, which in turn are also receiving some bank finance. thus, from miniscule amounts, the exposure of the banking sector to housing loans has gone up. unlike many other countries, asset impairment on account of housing finance constitutes a very small portion. however, with growing competition in the housing finance market, there has been a growing concern over its likely impact on the asset quality. while no immediate financial stability concerns exist, there is a need to put in place appropriate risk management systems, strengthen internal control procedures and also improve regulatory oversight in this area. banks also need to monitor their exposure and the credit quality. in a fiercely competitive market, there may be some temptation to slacken the loan scrutiny procedures and this needs to be severely checked. having delineated the broad contours of retail banking in india let me now come to its opportunities and challenges. opportunities and challenges of retail banking in india retail banking has immense opportunities in a growing economy like india. as the growth story gets unfolded in india, retail banking is going to emerge a major driver. how does the world view us? i have already referred to the bric report talking india as an economic superpower. a. t. kearney, a global management consulting firm, recently identified india as the " second most attractive retail destination " of 30 emergent markets. the rise of the indian middle class is an important contributory factor in this regard. the percentage of middle to high income indian households is expected to continue rising. the younger population not only wields increasing purchasing power, but as

consumer boom. note that during the 10 years after 1992, india's economy grew at an average rate of 6. 8 percent and continues to grow at the almost the same rate – not many countries in the world match this performance. second, changing consumer demographics indicate vast potential for growth in consumption both qualitatively and quantitatively. india is one of the countries having highest proportion ( 70 % ) of the population below 35 years of age ( young population ). the bric report of the goldman - sachs, which predicted a bright future for brazil, russia, india and china, mentioned indian demographic advantage as an important positive factor for india. third, technological factors played a major role. convenience banking in the form of debit cards, internet and phone - banking, anywhere and anytime banking has attracted many new customers into the banking field. technological innovations relating to increasing use of credit / debit cards, atms, direct debits and phone banking has contributed to the growth of retail banking in india. fourth, the treasury income of the banks, which had strengthened the bottom lines of banks for the past few years, has been on the decline during the last two years. in such a scenario, retail business provides a good vehicle of profit maximisation. considering the fact that retail ’ s share in impaired assets is far lower than the overall bank loans and advances, retail loans have put comparatively less provisioning burden on banks apart from diversifying their income streams. fifth, decline in interest rates have also contributed to the growth of retail credit by generating the demand for such credit. in this backdrop let me now come two specific domains of retail lending in india, viz., ( a ) credit cards and ( b ) housing. credit cards in india while usage of cards by customers of banks in india has been in vogue since the mid - 1980s, it is only since the early 1990s that the market had witnessed a quantum jump. the total number of cards issued by 42 banks and outstanding, increased from 2. 69 crore as on end december 2003 to 4. 33 crore as on end december 2004. the actual usage too has registered increases both in terms of volume and value. almost all the categories of banks issue credit cards. credit cards have found greater acceptance in terms of usage in the major cities of the country, with the four major metropolitan cities accounting for the bulk of the transactions. in view of this ever increasing role of credit cards a working group was set up for regulatory mechanism for cards.