Loan growth in the banking industry slowed in January

MUMBAI: As a result of sluggish growth in industry, service sector and personal loan disbursements, overall loan growth in the country's banking industry has been modestly low year-on-year in January this year. Withdrawals are also believed to have slowed due to the RBI's increase in risk weights in November last year.

Loan growth in January was 16.20 percent which was seen at 16.70 percent in January last year. However, the number of loan growth in agriculture and allied sectors has been seen to be significantly higher. According to Reserve Bank data, loan growth in agriculture and allied sectors stood at 20.10 percent in January, as against 14.40 percent in January last year. Credit withdrawals by industries are seen to slow down.

As against 8.70 percent in January 2023, this figure has decreased to 7.80 percent in January of the current year. Among industries, credit demand from the food processed and textile sectors has remained high, while credit withdrawals from the basic metals and metal products and chemicals industries have been subdued.

Credit growth in the service sector, which accounts for a large share of the country's economy, has moderated to 20.70 as compared to 21.40 in January last year, according to Reserve Bank data.

The growth of personal loans has also slowed down, with vehicle and other personal loan segments showing sluggish growth. The Reserve Bank had increased the risk weight in November last year in view of the extraordinary rise in unsecured loans.

In recent years, there has been a significant change in the structure of bank lending. Service sector and retail credit are growing attractively. The latest Financial Stability Report of the Reserve Bank has revealed that unsecured credit has also increased in retail loans.