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Loan Growth Decelerates: Key Takeaways from RBI's Release on Loans

  • Loan growth is slowing down, although not yet showing strong trends.

  • Both public and private banks are experiencing similar trends of growth reversal.

  • The slowdown in loan growth is more pronounced in metro/urban areas, while rural and semi-urban markets are holding up better.

  • Lenders' intent to lend remains strong, indicating comfort with asset quality challenges.

  • Loan growth in the government and corporate sectors is slower, with no significant signs of recovery in the corporate sector.

  • Working capital-linked products are still in demand, but longer-term loans are experiencing a slowdown.

  • Larger ticket-size loans have not yet seen a significant deceleration.

  • Private and public banks are showing similar trends in loan growth.

  • Lenders expect to grow their balance sheets at 12-15% levels in FY2024, with private banks more comfortable in growing their MSME and retail loan portfolios.

  • Housing loan disbursements have started to slow down, possibly due to increased interest rates, but the flow of credit remains healthy.

  • Loan growth in the corporate sector could decelerate as working capital demand shifts back to the bond market.

  • Asset quality and credit costs are expected to remain positive, with no signs of stress in the portfolio currently.

  • Credit costs will be reassessed if there are any unforeseen developments or regulatory changes, particularly regarding ECL provisions.

  • Early warning indicators and discussions with companies suggest a favorable asset quality outlook.


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