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Informist, Monday, Sept. 30, 2024

 

NEW DELHI – Banks' personal loan growth continued to ease in August, with data released by the Reserve Bank of India Monday showing that it declined to 16.9% as of Aug. 23 from 18.3% a year ago. As of Jul. 26, the increase in banks' personal loans was 17.8%, after excluding the impact of HDFC Bank's July 2023 merger with Housing Development Finance Corp.

 

The continued decline in personal loan growth is a positive considering the Indian central bank had sounded a warning about the same last year and taken measures in November to clamp down on it. Within personal loans, credit card outstanding was 19.9% higher as on Aug. 23, down from 31.4% last year and 22.0% as on Jul. 26. Similarly, growth in 'other personal loans'--which include unsecured loans--was down to 13.2% from 23.7% last year and 14.5% as of Jul. 26, as per the latest data.

 

However, loans against gold jewellery were up a massive 40.9% as of Aug. 23, twice the year-ago growth rate of 20.4%. The gold loan growth rate was also higher than the 39.0% recorded as of Jul. 26. Close on the heels of the bank credit data, the RBI on Monday said it had reviewed practices followed by companies regarding loans given against pledged gold ornaments and jewellery. According to the central bank's review, "several irregular practices" were found. These included deficiencies in the use of third-parties for sourcing and appraisal of these loans, gold being valued without the customer being present, inadequate due diligence, and incorrect application of risk-weights, among others.

 

In light of the issues, the RBI has asked lenders to "comprehensively review" their gold loan policies, processes, and practices. "Further, the gold loan portfolio should be closely monitored, especially in the light of significant growth in the portfolio in certain SEs," the central bank added.

 

Personal loans apart, overall bank credit was up 15.0% as of Aug. 23, excluding the aforementioned merger, largely unchanged from 14.9% a year ago and 15.1% as on Jul. 26. Loans to industry were up 9.8%, up from 5.3% a year ago, but lower than 10.2% as on Jul. 26.  End

 

Reported by Siddharth Upasani

Edited by Akul Nishant Akhoury

 

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