Personal loan growth stays high in January despite hike in risk weights

The pace of growth in the personal loan segment remained robust in January this year despite a hike in the risk weighting for consumer credit exposures.

The personal loan segment grew 21 per cent year-on-year (Y-o-Y) in January, compared to the 22.3 per cent Y-o-Y growth registered in October 2023.

The credit in this segment expanded 26.6 per cent on a Y-o-Y basis in January 2023.

The pace of credit offtake in the credit card segment also remained high at 31.3 per cent Y-o-Y basis in January 2024, compared to 28 per cent in October 2023 and 31.2 per cent a year ago, according to RBI data.

In November 2023, the Reserve Bank of India (RBI) increased the risk weighting on unsecured lending, including personal loans and credit card loans, and bank credit to NBFCs.

It hiked the risk weighting for consumer credit exposures from 100 per cent to 125 per cent.

RBI Governor Shaktikanta Das flagged concerns over the high growth in consumer credit and the increasing dependency of NBFCs on bank borrowings in July and August 2023.

The effect of RBI action was visible in bank loans to NBFCs. The growth rate nosedived to 15.6 per cent in January this year from 30.6 per cent Y-o-Y growth in January 2023.

RBI said the credit to industry grew by 7.8 per cent Y-o-Y in January 2024 as compared with 8.7 per cent in January 2023. 

The credit to services sector grew by 20.7 per cent in January 2024 as against 21.4 per cent a year ago.

Credit growth to agriculture and allied activities improved to 20.1 per cent in January 2024 from 14.4 per cent a year ago, RBI added.