Personal loans overtake business loans

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A resumption of bank loan disbursements is a key indicator of the recovery in demand and the increase in consumer spending. The latest data from the government and the RBI indicate that the demand for credit is on the rise and the personal loan segment is exceeding most parameters.

Over 63,000 crore in loans were dispersed in the fortnight leading up to Diwali. The latest data from the Ministry of Finance shows that loans totaling 63,547 crore were sanctioned between Oct. 16 and Oct. 31 as part of the national credit awareness program.

Of that amount, most of it went to businesses, followed by agriculture, housing as well, or around 9,000 crore in loans made during this period, followed by personal loans, car loans, and so on.

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Typically the second half of the year is stronger when it comes to credit growth, with the holiday season and so on. The latest data from the RBI shows that credit increased 6.7% from the previous year at the end of September.

Personal loans have grown the fastest, surpassing the growth we experienced last year. Lending to the agricultural sector also remained higher, lending to industry increased 2.50% from 0.4% the previous year, but the service sector slowed down somewhat. Loans to this category only increased 0.8% from the previous year, compared to the 9.2% growth we experienced the previous year.

Interestingly, the share of personal loans in total bank lending may have exceeded all lending to the industrial sector for the first time in the September quarter. The share of loans to industry fell to 26% from 27% a year ago, while the share of personal loans, which accounted for a quarter of all bank loans last year, rose to 27% and constitutes the largest part.

Over 29 lakh crore in personal loans were still outstanding at the end of September, compared to around 28 lakh crore in industry loans. Lending to industry has also fallen because there has been a lot of deleveraging as banks aggressively encouraged home loans in addition to other segments like auto loans and gold, leading to the type of increase that we have seen.


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