Indian banks' loan growth moderates in September amid cenbank clampdown, data shows

IDFC First Bank

31/10/2024 11:00

MUMBAI, Oct 31 (Reuters) - Indian banks' loan growth
moderated this September, compared with the same month a year
ago, central bank data showed on Thursday, as the impact of the
Reserve Bank of India's clampdown on "exuberance" in retail
lending continued.
    Banks' credit grew at 14.4% year-on-year last month, slower
than the 15.3% increase in September 2023, excluding the impact
of HDFC Bank merging with parent Housing Development Finance
Corp (HDFC), the RBI said.
    Including the impact of the merger, banks' loans grew 13%
last month, compared with 20% a year ago.
    Loan growth had moderated in August as well.
    Indian banks have consistently reported double-digit loan
growth for a while, helped by healthy economic growth and urban
consumption. However, the RBI, worried about the risk of bad
loans, imposed higher capital requirements on banks late last
year.
    Despite that, some segments, such as personal loans and
credit card loans posted strong growth, in excess of 25%, until
earlier this year when the central bank governor warned against
"exuberance".
    The RBI followed up on its norms with a series of actions
against non-complying entities and that, along with rising
defaults especially in the once fast-growing segments like
personal loans and credit cards, have slowed both loan growth.
    Banks' personal loan growth halved to 12.1% in September
from a year ago, while growth in credit card outstanding dropped
to 18% from 31.4% a year ago, the RBI data showed.
    A rise in defaults by over-leveraged small borrowers is
hitting India's top lenders, with bank executives and analysts
expecting higher levels of stress in these personal segments
over the next year.
    Credit growth to the services sector decelerated to 15.2% in
September from 21.6% a year ago, primarily due to lower growth
in credit to non-banking financial companies.
    On the flip side, loans to industry grew by 9.1%
year-on-year in September, quicker than the 6% growth last year.

 (Reporting by Siddhi Nayak; Editing by Savio D'Souza)
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