Select Page

Gross bank credit offtake witnessed an increase of 19.9% year-on-year (y-o-y) in December 2023 propped by sustained demand from the personal loans and services segments. However, both categories have moderated compared to prior periods and the impact of the merger between HDFC Bank and HDFC offset the tepid growth in the industry segment. Without considering the merger, the y-o-y growth stood at 15.6%, higher by 0.7% than last year’s growth number of 14.9%, according to a CareEdge report.

The slowdown follows the risk weight increase by the Reserve Bank of India on unsecured loans and credit to NBFCs.

These segments could likely witness some deceleration ahead due to risk weights tightening, the rating agency said.

Personal loans witnessed a robust growth of 28.5% y-o-y due to the impact of the merger (reclassification of HDFC’s advances), and growth in credit card outstanding, other personal loans and vehicle loans.

Excluding the merger impact, the growth rate reduced by around 270 bps to 17.7% in December 2023 on a y-o-y- basis.

Services segment reported a rise of 22.9% y-o-y in December 2023 (lower than 25.4% in November 2023) due to growth in trade, commercial real estate, and Non-Banking Financial Services (NBFCs) (lower compared to the prior period). It also reported a robust growth of 19.6% y-o-y vs. 19.4% a year ago without considering the merger.

Personal loans matrix

The personal loans segment (the largest segment with a 34% share) witnessed a robust growth of 28.5% y-o-y for December 2023 boosted by the impact of the HDFC merger, growth in credit card outstandings, other personal loans, housing loans, and vehicle loans. Credit growth in the personal loans space continues to be driven by miniaturisation of credit, increased use of credit bureaus for faster decisions and e-commerce transactions. Within the personal loans segment, all major sub-segments witnessed strong demand during the month. If we consider the growth excluding the merger, it marginally moderated to 17.7% y-o-y as compared to 20.4% y-o-y in December 2022 which can be attributed to the moderation in the growth rate of housing and vehicles.

Housing loans grew by 35.6% y-o-y in December 2023 compared to 16.4% a year ago mainly due to the merger (reclassification of HDFCs’ advances), sales of high-value residencies, a pause in the interest rate cycle, strong launch pipeline of residential projects and incentives and schemes offered by developers. If the merger was excluded, the growth would have decelerated by roughly 190 bps to 14.4% y-o-y.

Vehicle loans registered a slightly lower growth of 20.5% y-o-y in December 2023 as compared to 24.6% in the year-ago period. The growth can be attributed to comparatively higher sales of passenger vehicles and premiumisation of the vehicle market.

Credit card outstanding continued to be elevated in December 2023 reaching Rs 2.5 lakh crore, a y-o-y growth of 32.6%, while increasing by 2.9% sequentially (which is lower than December 2022 rate). However, the credit card segment has seen some moderation in the y-o-y growth rate sequentially after the RBI increased the risk weights. Meanwhile, the monthly spending has increased significantly along with the number of cards in force, hence the spending per card has increased marginally.

The other personal loans reached Rs 13.3 lakh crore and rose by 22.9% y-o-y which is slower than the growth rate reported last month given RBI’s action of increasing the risk weights on consumer loans. The growth can be attributed to a rise in small ticket-size loans and faster turnaround due to digitalisation.

  • Published On Feb 12, 2024 at 08:00 AM IST

Join the community of 2M+ industry professionals

Subscribe to our newsletter to get latest insights & analysis.

Download ETBFSI App

  • Get Realtime updates
  • Save your favourite articles

icon g play

icon app store


Scan to download App
bfsi barcode

Share it on social networks