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Credit growth at Indian banks has dropped to its lowest level in nearly two years, the latest Reserve Bank of India (RBI) data shows, as slowing domestic consumption weighs on demand.
This adds to the challenges facing Narendra Modi as he begins his second term as prime minister with India’s economy at its weakest levels in six years.
“The slowdown in credit growth this time is a result of both reduced demand and supply,” Madan Sabnavis, chief economist at CARE ratings, said.
Lending growth by banks had nearly halved to 8.8 percent at the end-September from the start of the year.
The RBI data includes all banks in India, which is dominated by state-run lenders Bank of Baroda, Punjab National Bank and Union Bank of India as well as private ones such as HDFC Bank and ICICI Bank.
While retail lending has driven growth, banks are taking a more cautious approach on some consumer loans.
“In certain retail loans we’re seeing customers delaying the payments by a few days over the due date,” said the head of consumer banking segment of a private bank, adding that this does not bode well when corporate lending has plunged.
A report last month by India Ratings predicts “further moderation” retail lending in 2020 “given the consumption slowdown across segments including housing and auto”.
“Even the unsecured loans, which include credit cards, education loans and other personal loans have seen a moderation in growth,” the report said.
source-DS
