Informist, Thursday, Oct. 31, 2024

NEW DELHI – Growth in Indian banks' personal loans continues to moderate, with data released by the Reserve Bank of India on Thursday showing they were 16.4% higher as of Sept. 20, excluding the impact of the merger of HDFC Bank with Housing Development Finance Corporation. As of Aug. 23, personal loans were 16.9% higher.

While the declining personal loan growth rate is a sign of the Indian central bank's measures from last year continuing to have an effect, gold loans were 51.0% higher as of Sept. 20, up from 40.9% as of Aug. 23 and 14.6% a year ago, the data showed. This is the last set of sectoral bank credit data before the RBI's Sept. 30 warning that it had found several irregularities in the gold loan practices of lenders. In light of the issues, the RBI asked lenders to "comprehensively review" their gold loan policies, processes, and practices and take remedial measures within three months, failing which the central bank would take supervisory action.

According to the RBI data released Thursday, gold loans by banks were up 5.0%--or INR 66.91 billion--as of Sept. 30 from Aug. 23.

While gold loans rose at a faster clip, growth in other segments of personal loans continued to weaken, the only exception being loans against fixed deposits.

In another sign of the continued impact of the RBI's measures to clamp down on the boom in unsecured credit, bank credit to non-banking financial companies was up only 9.5% as of Sept. 20, down from 21.9% a year ago and 11.9% as of Aug. 23. As part of its actions last year, the RBI had increased the risk weights on banks' exposure to NBFCs, in effect raising their cost of funds, while also hiking the risk weights on shadow-banks' unsecured loans.

Meanwhile, overall bank credit was 14.4% higher as of Sept. 20, down from 15.0% as of Aug. 23 and 15.3% a year ago, with agricultural loans increasing at a robust pace of 16.4% and credit growth to industry improving to 9.1% from 6.0% a year ago.

"The improved industrial credit growth was broad-based across 'micro & small', 'medium' and 'large' industries. Among major industries, credit to 'chemicals and chemical products', 'food processing', 'petroleum, coal products and nuclear fuels', and 'all engineering' recorded a higher growth in September 2024 as compared to their respective growth rates a year ago, while credit growth to 'basic metal and metal product', and 'textiles' moderated," the RBI noted on Thursday. End

Reported by Siddharth Upasani

Edited by Vidhi Verma

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