Risk weighting slows unsecured loan growth
personal loans and credit-card outstanding, has continued to slide in India after the central bank enhanced the risk weighting on such exposures to minimise the likelihood of mounting delinquencies in the banking system.
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Unsecured loan growth slowed to about 18% in April, from 23% in November 2023, when the central bank made it less attractive for lenders to advance such credit, the latest data published by the Reserve Bank of India (RBI) showed.
Sequentially, personal and credit card loans expanded less than a percentage point in the month, while consumer durable loans shrank.
«Credit card loan growth declined as banks took a cautious stance due to increased delinquency in the industry,» said Anand Dama, senior research analyst at Emkay Global Financial Services. «Going forward, most banks expect the credit growth momentum to moderate a bit due to regulatory action on unsecured retail and NBFC loans, which otherwise had been a key growth contributor for some time.»
Consumption expenditure appears to have trailed the broader GDP expansion in the fourth quarter of FY24, suggesting the likelihood of tepid growth in consumption credit through FY25.
«Retail portfolio growth has declined led by moderation in credit card and other personal loans,» said Bunty Chawla, banking analyst at IDBI Capital. «Going forward, we need to monitor the impact of increased risk weight changes in personal loans, credit cards and NBFC on
