RBI Measures Reflect in Slowed Unsecured Lending Growth and Altered Banking Landscape

In a recent turn of events, the Reserve Bank of India’s (RBI) stringent measures have led to a noticeable moderation in the growth of unsecured lending, which decreased to 22.9% year-on-year in December. This decline, from the previous figure of 24.3%, can be attributed to the RBI’s imposition of elevated risk weights on unsecured lending by commercial banks.

The impact of these revised norms is evident in the latest sectoral data of bank credit, with outstanding unsecured loans totalling Rs 13.33 lakh crore as of the end of December. Moreover, credit card outstanding growth also witnessed a slowdown, dropping to 32.6% year-on-year in December, compared to 34.2% in November, resulting in a total credit card outstanding of Rs 2.5 lakh crore.

Beyond unsecured loans, the broader retail loans segment experienced a slowdown, recording a growth of 17.7% year-on-year in December, down from 20.4% a year ago and 18.6% in November.

Despite these adjustments, credit offtake continued to grow, increasing by 20.3% year-on-year to reach Rs 159.7 lakh crore for the fortnight ended January 12, 2024. The growth was influenced by HDFC’s merger with HDFC Bank and the expansion in personal loans. Excluding the merger impact, credit grew at a lower rate of 16.1% year-on-year.

Deposit growth also saw an uptick, reaching 13.1% year-on-year for the fortnight, reaching 199.8 lakh crore as of January 12, 2024. The Short-term Weighted Average Call Rate (WACR) stood at 6.76% as of January 19, 2024, reflecting changes in short-term rates due to various factors in the financial landscape.