Bank credit hits ₹150 tn on retail, HDFC merger

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₹150 trillion mark in September, aided by Housing Development Finance Corp.’s and HDFC Bank’s merger, as well as sustained credit demand from individuals and small businesses. Following the merger of mortgage lender HDFC with India’s largest private lender, its loan book and deposits became part of the banking system. HDFC had assets of ₹7.2 trillion under management and deposits of ₹1.6 trillion as on 31 March.

The merger led to a one-time rise in bank credit and deposit numbers, as reflected in the data for the fortnight ended 14 July. To be sure, the ₹150 trillion includes food credit, or loans extended to the Food Corp. of India and state governments to procure foodgrain.

Aggregate bank credit was at ₹50 trillion in December 2012, and took a little over seven years to reach ₹100 trillion. In less than four years it reached ₹150 trillion, according to data from the Reserve Bank of India (RBI). In July, bank loans to retail borrowers grew 31.7% (18.4% excluding the impact of HDFC merger) from a year earlier, while loans to MSMEs (micro, small and medium enterprise) rose by 15.7%.

In contrast, loans to large industries were up by just 4.3% from a year ago. Banks will continue to rely on retail and MSME borrowers, due to muted corporate credit demand, experts said. Outstanding credit in the banking system rose 14.7% y-o-y in July or 19.7% which includes loans of erstwhile HDFC.

Care Ratings expects the pace of growth to moderate to about 13% by the end of FY24. “Retail loans are growing at a quick pace as a result of India’s economic growth, formalization of credit and willingness of customers to borrow," said Sanjay Agarwal, senior director, Care Ratings. Agarwal said unsecured personal loans, especially those with high