Overview of Retail Loan Growth and Credit Trends in May 2024

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The growth of retail loans, which are loans for personal or household use, slowed down in May 2024. It increased by 17.8% compared to the previous year, which was a bit lower than the 19.1% growth seen earlier. This slowdown was mainly because there was less growth in loans that are not backed by any collateral or security, known as unsecured credit. The Reserve Bank of India (RBI) provided this information.

Impact of Regulatory Changes

In November 2023, the RBI made some changes to the rules for certain types of loans. These changes were meant to signal to banks and other lenders to be more careful when giving out loans. As a result of these changes, the growth of loans in the “other personal loans” category, which includes unsecured loans, decreased by 17.3% in May 2024 compared to the previous year. This information was shared in the RBI’s Financial Stability Report for June 2024.

Specific Loan Categories

Within the retail loan segment, the growth of housing loans, which are the largest type of retail loans, increased by 16.9% in May 2024, up from 13.8% the previous year. Additionally, loans against gold jewelry saw a significant increase in growth to 29.7% from 15.1% a year ago.

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Overall Credit Growth

The overall non-food bank credit, which includes all types of loans except those related to food, grew by 16.2% in May 2024, compared to 15.5% the previous year. Credit to industries increased by 8.9% in May 2024, up from 6% in May 2023. Specific industries like engineering, chemicals, food processing, infrastructure, and textiles saw an acceleration in credit growth, while credit growth for basic metal, metal products, and petroleum slowed down.

Credit Growth in Different Sectors

The services sector saw a robust credit growth of 20.7% in May 2024, compared to 21.3% the previous year. This growth was supported by increased credit in commercial real estate, transport operations, and professional services. However, credit growth to non-banking financial companies (NBFCs) declined in May 2024 compared to the previous year.

Conclusion

In conclusion, the RBI reported that credit growth to agriculture and allied activities increased to 21.6% in May 2024 from 16% the previous year. This means that loans to the agriculture sector showed significant growth during this period.

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