The rise in interest rates and economic slowdown are showing their impact. While the growth in personal and housing loans has moderated, the latest RBI data shows that credit card outstanding rose 87 per cent to Rs 26,596 crore (Rs 265.96 billion), with Rs 12,375 crore (Rs 123.75 billion) added between May 25, 2007 and May 23 this year. The rise was 45 per cent till May 2007.
Economists and bankers fear a rise in credit card defaults due to the sharp increase in outstanding balances on credit cards, especially when economic slowdown looms large. Banks are already complaining of rising defaults on unsecured advances such as credit cards and personal loans.
There was, however, some moderation in the personal loan segment, which was largely attributed to higher interest rates. The growth rate in this segment dipped from 23.9 per cent at the end of May 2007 to around 16 per cent till May-end this year. Personal loans accounted for nearly 17 per cent of the incremental non-food credit.
The flow of housing loans too has slowed down to 13.8 per cent till May-end this year, compared to 21.6 per cent last year. As of May 23, 2008, total outstanding home loans were estimated at Rs 2,62,486 crore (Rs 2,624.86 billion), Rs 31,70 crore (Rs 31.70 billion) higher than the level at the end of May last year.
Growth in loans to commercial real estate remained high, notwithstanding moderation, the Reserve Bank of India said in a report ahead of the monetary policy review tomorrow. The growth rate moderated to around 32 per cent from 69.7 per cent a year ago.
Credit to non-banking finance companies -- another sensitive sector identified by RBI -- rose 62 per cent till May-end this year, compared to 38.7 per cent last year.
While slowdown in economic activity due to spriralling input costs and higher interest rates are worrying policymakers, infrastructure lending provides a silver lining. The infrastructure sector, comprising power, roads, ports and telecom, saw a 41.7 per cent rise in credit off-take till May this year.
The growth in credit flow to the infrastructure sector was higher than the 32.6 per cent rise seen till May 25, 2007. The outstanding credit for the segment stood at Rs 2,03,331 crore (Rs 2,033.31 billion) at the end of May 23 this year.
The other sectors contributing to non-food credit growth of around 25 per cent were petroleum, textiles, iron and steel, food processing, chemicals, engineering, vehicles and construction industries.