Nov measures on unsecured lending trims growth

The Reserve Bank of India‘s clamping down on unsecured loans with higher capital requirements is beginning to bite. Such loans are growing at a slower pace of 22.9 percent, from 24.3 prior to the central bank’s tightening. Also the growth in credit card outstanding to which the measures are also applicable, also slowed.

Reserve Bank of India imposed higher risk weights on unsecured lending on unsecured lending by commercial banks. The RBI data since November 17 shows that growth in unsecured lending in December moderated to 22.9 percent year-on-year compared to 24.3 percent in November according to RBI’s latest release on sectoral data of bank credit on Wednesday. The outstanding unsecured loans are at 13.33 lakh crore as of end December.

“Post the November 16 2023 norms which are also applicable to credit card portfolios, banks have continued to remain cautious in their credit assessment of new customers.” said Chitrabhanu K.G., senior vice president at Federal Bank.

Revised norms have also impacted credit card outstanding. The growth in credit card outstanding in December was contained at 32.6 percent year-on-year compared to 34.2 percent in November. The total credit card outstanding is at Rs 2.5 lakh crore as of December 2023.

Overall retail loans growth slowed to 17.7 per cent (y-o-y) in December from 20.4 per cent a year ago and 18.6 percent in November. Total non-food bank credit increased by 15.8 per cent in December 2023 as compared with 15.3 per cent a year ago. The data id collected from 41 select commercial banks, accounting for about 95 per cent of the total non-food credit deployed by all commercial banks, the RBI said in the release.

Credit to industry grew at 8.1 per cent (y-o-y) in December 2023 as compared with 8.6 per cent in December 2022. Credit to services sector inched up to 19.6 per cent (y-o-y) in December 2023 as compared with 19.4 per cent a year ago. Credit to agriculture and allied activities expanded by 19.5 per cent (y-o-y) in December 2023 as compared with 11.6 per cent a year ago.

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Roy Walsh

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