Even as credit card debt is rising, bank lending to NBFCs declines

MUMBAI: RBI statistics indicated that while credit card outstandings—which are mostly driven by consumers—continue to rise, banks are cutting down on lending to non-bank financial companies (NBFCs) after the RBI raised the risk weightage on certain of these loans. Bank lending to nonbank financial companies (NBFCs) decreased from Rs 15.2 lakh crore in December 2023 to little over Rs 15 lakh crore in January 2024, according per statistics disclosed on Thursday.

But the amount of credit card debt outstanding increased 31% year over year, peaking at Rs 2.6 lakh crore in January from Rs 2.5 lakh crore in December. In November, the entire amount of credit card debt outstanding was Rs 2.4 lakh crore, while the total amount of loans due to NBFCs was Rs 14.9 lakh crore. Bank loans to NBFCs increased by 21.5% in November compared to a decline to 15.1% in December. In January, credit to NBFCs increased at a rate of 15.6% annually.

Thanks to the HDFC-HDFC Bank merger, consumer durables climbed 14.4% as of January end of 2024, while home loans increased 37% year over year. Additionally, the merger increased the personal loan category’s total growth to 28.8% from the same time last year. At 31.3%, the annual growth rate for credit cards was the second-highest.
Loans for education increased by about 23%, loans for cars by 16.2%, and loans for gold and other personal items by 17.4% and 23.3%, in that order. As of the end of January, total bank credit increased by 20.3% annually. Bank credit would be 16.1% if the HDFC merger’s effects are taken out of the equation.
Bank credit is still mostly driven by services and personal loans, which are expanding by 23.9% and 28.8% annually, respectively. With the HDFC merger taken out of the picture, personal loan growth was just 21%. Bank lending to the sector kept growing at an eight percent single digit rate.