Banks’ loan growth moderated for a fifth straight month in November, central bank data showed, as lenders continued to rein in unsecured and personal loans after the Reserve Bank of India’s crackdown on “exuberant” lending.
Banks’ credit increased by 11.8% year-on-year last month, slower than the 16.5% rise in November 2023, excluding the impact of HDFC Bank’s merger with its parent Housing Development Finance Corp, according to RBI data released late on Tuesday.
Including the impact of the merger, banks’ loans grew 10.6% last month, compared with nearly 21% in the year-ago period.
The growth rate had slowed to 12.8% in October, excluding the merger, and to 11.5% including the merger. Loan growth had also moderated in July, August and September.
Indian banks have consistently reported double-digit loan growth for a while, helped by healthy retail demand and urban consumption.
However, in late 2023, the RBI, worried about the risk of bad loans, imposed higher capital requirements on personal loans and credit cards, which is now translating into slower growth in these segments.
Banks’ personal loan growth slowed to 12.2% in November from 22.4% a year ago, excluding the HDFC Bank merger impact, while growth in outstanding credit card debt dropped to 18.1% from 34.2% a year ago, the data showed.
The RBI has also warned the financial sector against “all forms of exuberance”, asked lenders to be watchful of a build-up in stress due to new lending models and flagged concerns about the interconnectedness between banks and non-banking finance companies (NBFCs).
Credit growth to the services sector decelerated to 14.4% in November from 22.2% a year ago, primarily due to lower growth in credit to NBFCs.
On the flip side, loans to industry grew by 8.1% year-on-year last month, quicker than the 5.5% growth last year.
Published – January 02, 2025 03:44 am IST
