Home Loan Outstanding Surges by ₹3.4 Lakh Crore in a Year: RBI Report
- raquelcamila999
- Jun 29, 2024
- 3 min read
The latest data from the Reserve Bank of India (RBI) reveals a significant rise in home loan outstanding, which has increased by ₹3.4 lakh crore over the past 12 months. This growth highlights a robust demand in the housing sector even as the overall growth in personal loans has slowed down. Let’s dive into the details of this financial development and understand its implications.
Home Loan Growth Outpaces Personal Loan Segment
The RBI’s data shows that the outstanding home loans have grown at an accelerated pace, with a year-on-year increase of 16.9% as of May 2024. This brings the total outstanding home loans to ₹23.49 lakh crore, a significant rise from ₹20.09 lakh crore in May 2023. This growth is noteworthy because it reflects a sustained demand for housing finance amidst a slower growth in the broader personal loan segment, which saw a year-on-year increase of 17.8%, down from 19.1% in the previous year.
Surge in Credit Card Outstanding
In addition to home loans, credit card outstanding has also seen a substantial increase. The outstanding amount rose by 26.2%, or approximately ₹55,000 crore, reaching ₹2.67 lakh crore in May 2024. This is a slightly lower growth rate compared to the 31.5% increase in the previous year, which had taken the credit card outstanding to ₹2.12 lakh crore. The increase reflects a growing reliance on credit cards for both everyday and significant purchases.
Regulatory Adjustments and Risk Management
In November 2023, the RBI had implemented stricter risk management measures by increasing the risk weight on bank exposures to consumer credit, credit card receivables, and non-banking finance companies (NBFCs) by 25%, up to 150%. This move was aimed at mitigating potential risks in these segments as the credit demand surged.
Overall Bank Credit Growth
On a broader scale, non-food bank credit registered a year-on-year growth of 16.2% in May 2024, totaling ₹162.30 lakh crore. This is a notable increase from the 15.5% growth recorded a year earlier. This growth in bank credit was largely driven by a robust demand from various sectors, particularly the industrial and agricultural sectors.
Industry-Specific Credit Expansion
The industrial sector saw a year-on-year growth in bank credit by 8.9%, reaching ₹36.87 lakh crore in May 2024, up from 6.0% growth in the previous year. This growth was led by large industries, which saw a 7.1% increase in loan outstanding, bringing their total to ₹26.53 lakh crore. Medium industries also experienced significant growth, with a 15.5% rise in loan outstanding to ₹3.13 lakh crore, while micro and small industries saw a similar 15.5% increase, reaching ₹7.36 lakh crore.
Key Industry Trends
Among major industries, sectors like engineering, chemicals, food processing, infrastructure, and textiles saw an accelerated credit growth. However, the basic metal and metal products, along with petroleum, coal products, and nuclear fuels sectors, experienced a slowdown in credit growth.
Agricultural and Services Sector Credit
The agricultural sector showed a strong year-on-year credit growth of 21.6%, totaling ₹21.39 lakh crore in May 2024, up from 16.0% a year ago. The services sector also demonstrated robust credit growth at 20.7%, supported by increased credit demand in commercial real estate, transport, and professional services. However, the credit growth to NBFCs decelerated during this period.
Conclusion
The RBI’s data underscores a significant expansion in home loans and a moderate growth in other personal loans, reflecting a mixed picture of credit demand across different sectors. While the housing sector continues to see robust demand, the broader personal loan segment shows signs of moderation. The increase in credit card outstanding highlights a growing reliance on credit for consumer spending. As regulatory measures tighten, it will be crucial to monitor how these trends evolve and their implications for the broader economy.
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