RBI releases data which indicates banks saw their eighth consecutive month of loan growth in February at a slower pace.
The increase in loans decreased to 12% in the last 12 months, falling by 4.6% as compared with the same month of the previous year at 16.6%
Loan Growth at Indian Banks Moderates for Eighth Straight Month
RBI Data Mumbai: Bank loans in India have recorded a slow growth rate for the eighth month in a row until February, as per the data given by the Reserve Bank of India on Thursday. The restrainment has been because of the decrease in personal and credit card loans, which followed the Reserve Bank’s strict measures on lending.
The data showed that loans of all banks increased by 12% on an annual basis (y/y) in February, but that is below the previous year’s 16.6% higher rate. If the merger of HDFC Bank with its parent company, Housing Development Finance Corp, is taken into account, the growth rate will be slightly lower at 11%. In the same time frame, the rate of loan expansion was 20.5% from the former year’s 19.2%. The trend has been consistent; loan growth had slowed to 12.5% (excluding the merger) and 11.4% (including the merger) back in January. For a time, the credit market in India was growing very fast mainly due to the particular demand for the unsecured loans from the retail sector. It’s important to note that these measures, besides the reduction of the leverage, increased the loan to deposit ratio which then led to the banks’ foregone deposits being replenished.
The slowdown had been epic on personal and credit card loans among them, with both sagging heavily. The percentage turning into a fall is 8.4% year-on-year in the case of personal loans this February compared to the gains reported of 19.5% a year earlier when one excludes the HDFC Bank merger. The outstanding amount of credit card debt recorded an increase of 11.2% in the last month, which is a major decrease from the 31% growth observed in February, last year.
In the services sector, credit growth slowed down to 13% last month. This was a 21.4% drop when compared to the previous month due to the lesser amount of NBFCs being granted money. Ironically, the industrial sectors’ loans exhibited a minor rise of 7.3% in February compared to the last year’s 8.4%. The RBI, on the other hand, approved the capital requirement levels being lessened in its last session under the leadership of Governor Sanjay Malhotra which most of the market pros believe can be the boost for the economy.
Nevertheless, they have taken the view that the cascading effects of this revision may not be achievable presently and the improvement may only be seen a few months from now in the banking sector. The trends in loan growth will be watched closely as the banks navigate the changing regulatory environment and a variable market in India.
