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Personal loans drive credit growth in May

The Financial Express logo The Financial Express 30-06-2022 Anish Mondal
The personal loans segment maintained an uptrend in May, rising a smart 16.4%, on the back of a high base of 12.8% in the year-ago period, primarily driven by the housing and vehicle loans segments. © Provided by The Financial Express The personal loans segment maintained an uptrend in May, rising a smart 16.4%, on the back of a high base of 12.8% in the year-ago period, primarily driven by the housing and vehicle loans segments.

Outstanding personal loans as of May 20 at Rs 34.67 trillion remained higher compared with the outstanding credit to industry at Rs 31.65 trillion and to the services sector at Rs 30.43 trillion, Reserve Bank of India (RBI) data showed. The personal loans segment maintained an uptrend in May, rising a smart 16.4%, on the back of a high base of 12.8% in the year-ago period, primarily driven by the housing and vehicle loans segments.

Both home and vehicle loans, which form the bulk of the personal loans, saw an increase of 14%, the RBI data showed.

Outstanding loans for housing (including the priority sector), as of May 20, stood at Rs 17 trillion of the total outstanding personal loans of Rs 34.7 trillion, while the outstanding vehicle loans stood at 4.2 trillion. Loans taken against gold jewellery witnessed a decline and personal loans taken by keeping gold as collateral declined 2.9%, even as all the other categories of personal loans posted an improvement, the data revealed. Banks approved loans of up to Rs 73,752 crore in May against gold jewellery. Loans issued against gold had jumped 126% during the second wave of the pandemic, between May 2020 and May 2021.      

Credit to the services sector accelerated 12.9% in May, compared with a relatively weak 3.4% a year ago, mainly due to improved offtake by non-banking finance companies (NBFC).

While the non-food bank credit grew 12.6% year-on-year during the month under review, this came off a low base of a 4.9% growth a year ago. There was a reasonably good pick-up in credit growth to industry, which accelerated to 8.7% in May 2022, albeit off a very weak base of 0.2% in May 2021.

Interestingly, credit to large industries recorded a growth of only 1.9% on the back of a contraction of 3.1% during the same period last year, suggesting that bigger businesses are generating adequate cash flows, and also that the demand for loans has not really gained too much momentum. In contrast, the credit growth to micro and small industries accelerated to a good 33% from 8.9% a year ago.

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