July Sees 19.8% Surge In Bank Loans Fueled By HDFC Merger Influence

In July, bank loans experienced a notable 19.8 per cent year-on-year (y-o-y) increase, driven by the merger of Housing Development Finance Corporation with HDFC Bank. This, coupled with a surge in personal loans, contributed to the overall loan growth.

As of 29 July, non-food credit reached Rs 147.8 trillion, marking a y-o-y rise of 15.1 per cent.

Personal loans exhibited a remarkable y-o-y growth of 31.7 per cent, reaching Rs 47.3 trillion by the end of July. Within this category, housing loans soared by 37.4 per cent, credit card outstanding balances increased by 31.2 per cent, and other personal loans expanded by nearly 29 per cent. Advances secured by fixed deposits also saw a robust y-o-y increase of 24.2 per cent.

The surge in personal loans comes amid the Reserve Bank of India's vigilance regarding the proportion of unsecured personal loans.

Loans extended to the industrial sector witnessed a 6 per cent y-o-y increase, reaching Rs 34 trillion by 29 July. Among these, loans to micro and small industries demonstrated a growth of 10.2 per cent y-o-y, while medium and large industries experienced rises of 9.7 per cent and 4.3 per cent y-o-y, respectively.

Loans provided to non-banking financial services companies (NBFCs) observed a substantial y-o-y growth of 24 per cent, amounting to Rs 13.8 trillion by the end of 29 July.

According to a recent report by CareEdge Ratings, the outlook for bank credit remains positive due to factors such as economic expansion, increased capital expenditure, the implementation of the PLI scheme, and a push for retail credit. The personal loan segment is anticipated to outperform the industry and service sectors in FY24.

The credit rating agency projects credit growth to range between 13.0 per cent and 13.5 per cent for the fiscal year 2023-24 (April-March), excluding the impact of the merger.