MUMBAI (Reuters) – Indian banks’ loan growth moderated for a seventh straight month in January, central bank data showed on Friday, due to a drop in personal and credit card loans following tighter rules by the Reserve Bank of India.
The data showed that banks’ credit increased by 12.5% year-on-year last month, slower than the 16.1% rise in January 2024, excluding the impact of HDFC Bank’s merger with its parent Housing Development Finance Corp.
Including the merger impact, loans grew 11.4% last month, compared with 20.3% in the year-ago period.
The loan growth rate had slowed to 12.4% in December 2024, excluding the merger, and to 11.2% including the merger.
Banks’ loan growth had surged for years, boosted by retail demand, specifically for unsecured loans. But, in late 2023, the RBI, worried about the risk of bad loans, imposed higher capital requirements on personal and credit card loans as well as credit to non-banking finance companies (NBFCs).
Moreover, banks too have consciously scaled back loans to lower their credit-deposit ratio, a key metric to assess their liquidity position, amid a broad scramble to raise deposits.
The combined effect has been months of slowing loan growth, especially in personal and credit card loans.
However, earlier this week, the RBI tempered its capital requirement rule in its latest growth-supportive measure since Sanjay Malhotra took over as governor in December. The impact, though, will take a few months to show up, analysts said.
Banks’ personal loan growth halved to 9.2% in January from 20.8% a year ago, excluding the HDFC Bank merger impact, while growth in outstanding credit card debt dropped to 13% from 31.3%, the data showed.
Credit growth in the services sector decelerated to 13.8% in January from 21%, primarily as loans to NBFCs dropped.
Meanwhile, loans to industries grew by 8.2% last month, compared with 7.5% a year ago.
(Reporting by Siddhi Nayak; Editing by Savio D’Souza)
