Indian banks’ loan growth slows for eighth straight month in February, RBI data shows, ET BFSI

MUMBAI – Mortgage progress at Indian banks moderated for an eighth straight month in February, central financial institution information confirmed on Thursday, as a consequence of a drop in private and credit card loans following tighter guidelines by the Reserve Bank of India.

The information confirmed that banks’ credit score elevated by 12% year-on-year final month, slower than the 16.6% rise a 12 months earlier, excluding the affect of HDFC Bank‘s merger with mother or father Housing Improvement Finance Corp.

Together with the merger affect, loans grew 11% in February, in contrast with 20.5% within the year-ago interval.

The mortgage progress fee slowed to 12.5% in January, excluding the merger, and to 11.4% together with the merger.

India’s banking sector noticed speedy mortgage progress for a number of years, pushed by retail demand for unsecured loans.

Nevertheless, the RBI intervened in late 2023, imposing stricter capital necessities on private loans, bank card loans in addition to credit score to non-banking finance corporations (NBFCs).

Involved about potential dangerous loans, the RBI’s tighter lending norms aimed to mitigate threat. Banks concurrently diminished lending to optimise their credit-deposit ratio – a key liquidity metric – amid a scramble to lift deposits.

Consequently, mortgage progress has slowed considerably over the previous few months, with private and bank card loans notably affected.

Nevertheless, the RBI relaxed its capital requirement rule final month, marking a major shift since Sanjay Malhotra took over as governor in December.

Though analysts count on the change to positively affect the financial system, they are saying that the impact will solely develop into obvious in a couple of months.

Banks’ personal loan progress greater than halved to eight.4% year-on-year in February from 19.5% a 12 months in the past, excluding the HDFC Financial institution merger affect, whereas progress in excellent bank card debt dropped to 11.2% from 31%, the info confirmed.

Credit score progress within the companies sector decelerated to 13% in February from 21.4%, primarily as a consequence of a drop in loans to NBFCs.

In the meantime, loans to industries grew 7.3% final month, decrease than the 8.4% a 12 months earlier.

(Reporting by Siddhi Nayak; Enhancing by Sonia Cheema)