Personal loan growth in India slowed down to 14.2 per cent on a year-on-year (y-o-y) basis in January 2025 from 18.2 per cent during the corresponding period last year, the Reserve Bank of India's (RBI) sectoral credit deployment data indicated. The decline was dominated by soft credit demand in key segments of vehicle loans, outstanding credit cards, and other personal advances. The numbers, released on Friday, were collected from 41 selected commercial banks, which account for nearly 95 per cent of total non-food credit invested in the economy. While expansion in personal loans decelerated, total non-food bank credit grew 12.5 per cent y-o-y by the fortnight ended January 24, 2025, the most in three months. But this was lower than the 16.2 per cent y-o-y growth seen in the corresponding fortnight of the previous year.
Personal Loan Growth Dips To 14.2 Per Cent In January: RBI Data
Non-food bank credit stands at a three-month high, with personal loan growth slowing as credit offtake in significant segments improves
The consumer loan category, a prime propellant for retail credit, saw its expansion damped too, as discretionary expenditure demand decreased. The take-off in car loan credit and credit card outstanding saw dramatic deceleration, reflecting nervousness in consumer spending and thereby resulting in higher interest charges, dampening the demand for borrowing.
The data show that consumer confidence may have deteriorated, leading to lower borrowing of large ticket purchases. The banks would also have tightened lending standards in response to rising delinquency risk in unsecured loans.
Credit to the farm and allied industry had a 12.2 per cent y-o-y increase until January 24, 2025, which was significantly less than last year's 20 per cent expansion. Farm credit growth may have slowed down because of low demand for seasonal finance or changes in policy affecting farm credit release.
Industrial credit picked up moderately, though rising by 8.2 per cent y-o-y, an improvement from 7.5 per cent in January 2024. Outstanding in major industries of petroleum, coal products and nuclear fuels, basic metal and metal products, chemicals and chemical products, and engineering segments witnessed rapid growth.
The deceleration in consumer loan growth could reflect a change in borrowing patterns by consumers due to economic instability or conservative bank lending. On the other hand, the net expansion in non-food bank credit shows that steady credit is still flowing to strategic sectors. Moving ahead, the direction of interest rates, trends in inflation, and consumer sentiments will be essential in determining the pattern of credit demand in subsequent months.