Business Loans Boom, Personal Loans Slows Down: March Banking Trends After HDFC Merger

In March 2024, the Indian banking sector witnessed a notable increase in gross bank credit, primarily driven by lending to businesses, while personal loans experienced a slight slowdown compared to the previous year.
According to CareEdge Ratings, gross bank credit offtake showed a year-on-year increase of 20.2 per cent in March 2024, attributed largely to the merger between HDFC Bank and HDFC.

This trend was highlighted by the impact of the merger between HDFC twins, as reported by BFSI Research, based on data from the Reserve Bank of India (RBI).
However, without considering the merger, the year-on-year growth stood at 16.3 per cent, indicating notable growth compared to the previous year's figure of 15.0 per cent.
Lending to businesses, including industry and services, increased by 16.3 per cent in March 2024, compared to 12.5 per cent reported in March 2023.

Excluding the merger impact, the growth remained higher at 14.6 per cent compared to March 2023. In the services segment, there was a robust year-on-year growth of 22.9 per cent in March 2024, led by trade, commercial real estate, and non-banking financial services (NBFCs).

Meanwhile, the industry segment grew by 9.0 per cent year-on-year, mainly driven by growth in micro, small and medium enterprises (MSME).

Personal loans witnessed a robust growth of 27.6 per cent year-on-year in March 2024, primarily due to the impact of the merger. However, excluding the merger impact, the growth rate moderated to 17.7 per cent year-on-year, compared to 21.0 per cent in March 2023.
This slowdown was attributed to slower growth in vehicle loans and other personal loans.

Banks recorded a growth of 20.1 per cent in March 2024 compared to 15.4 per cent in March 2023, reflecting sustained demand and showed a growth of 9.0 per cent year-on-year in March 2024, with accelerated growth in chemicals and chemical products, food processing, and infrastructure.

It grew by 22.9 per cent year-on-year in March 2024, driven by commercial real estate and trade and witnessed a robust growth of 27.6 per cent year-on-year in March 2024, led by housing loans and credit card outstandings.

The credit exposure of banks to NBFCs stood at Rs 15.5 lakh crore in March 2024, indicating a 15.3 per cent year-on-year growth, despite the reclassification of HDFC's exposures post-merger.

However, the growth rate in this segment has slowed compared to the previous year, attributed to the RBI's increasing risk weights and rising capital market borrowings.
Commercial real estate and trade sectors showed growth in March 2024, with commercial real estate witnessing a significant rise of 38.9 per cent year-on-year due to the merger and continued robust demand.

In the personal loans segment, housing loans grew substantially by 36.9 per cent year-on-year, mainly due to the merger impact and strong sales of high-value residencies.
However, vehicle loans registered a lower growth of 17.3 per cent year-on-year in March 2024 compared to the previous year, attributed to higher sales of passenger vehicles.
Overall, the Indian banking sector experienced a mixed trend in March 2024, with lending to businesses showing a notable increase, while personal loans witnessed a slight moderation in growth.