Bank Credit Growth Slows Down to 13.7% as Demand for Personal and Agri Loans Drops
The Reserve Bank of India's clampdown on unsecured loans has led to a decline in bank credit growth, with personal and agriculture loans being the most affected. Meanwhile, industrial credit demand has seen a significant increase.
Bank Credit GrowthPersonal LoansAgriculture LoansIndustrial CreditRbiReal EstateSep 17, 2024
According to a recent report by Care Ratings, credit growth was dragged down by the slowdown in personal, agriculture, and micro, small, and medium enterprises (MSME) portfolios. Except for corporate lending, all other major sectors saw a slowdown in the reporting month.
Personal loans growth came down to 14.4% from 31.2% in the month, while vehicle loans also slowed down. However, this was partially offset by an increase in gold loans. Agriculture loans slowed to 4.1% from 5.8%, primarily due to seasonalities.
On the other hand, industrial credit demand almost doubled to 10.1% from 5.2%. The services segment saw credit demand falling to 14% from 23.4%, mainly due to reduced credit expansion in the non-banking financial companies (NBFCs) and trade sectors. However, this was partially offset by a rise in commercial real estate.
Another reason for the steep deceleration in credit growth is that lenders are increasingly focusing on managing their skewed credit-deposit (CD) ratio. Deposits have been flying out of their vaults for quite some time now, leading to a moderation in overall credit offtake this fiscal.
Care Ratings has forecast a moderation in overall credit offtake this fiscal, led by continued temperance in unsecured retail and slower corporate loans. This slowdown in credit growth is expected to have a ripple effect on the economy, with reduced access to credit for individuals and businesses.
Frequently Asked Questions
What is the current credit growth rate of banks in India?
The credit growth rate of banks in India has slowed down to 13.7% in July from 19.5% in the same month last year.
What is the main reason for the decline in credit growth?
The Reserve Bank of India's clampdown on unsecured loans last November is the main reason for the decline in credit growth.
Which sectors have seen a slowdown in credit demand?
Personal, agriculture, and MSME portfolios have seen a slowdown in credit demand.
What is the forecast for overall credit offtake this fiscal?
Care Ratings has forecast a moderation in overall credit offtake this fiscal, led by continued temperance in unsecured retail and slower corporate loans.
Why are lenders focusing on managing their credit-deposit ratio?
Lenders are focusing on managing their credit-deposit ratio because deposits have been flying out of their vaults for quite some time now.
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