Circumspect credit demand for mortgages and other retail-focused sectors does not reflect either a worrying slowdown or ineffectiveness of the percentage-point cut in policy rates, Governor Sanjay Malhotra said Wednesday, highlighting the long-term nature of housing loans and the expectedly careful decision making by individual borrowers.
"Fluctuations will be there. Housing credit overall is doing well," Malhotra said in reply to a question from the media on weak retail loan demand despite the steep reduction in rates in four months. "It may have moderated somewhat but these are to be expected. Overall housing credit is 14% as we speak, which is very good which is more than our average credit growth of 10% for this year."
Latest sectoral data from the central bank shows that until June 2025, growth in mortgages, vehicle loans, credit cards and other personal loans has slowed as lenders have been risk averse due to an uptick in delinquencies especially in unsecured loans and credit cards.
Mortgage growth has slowed to 9.6% in June, down from 18.2% on a year-on-year basis.
Malhotra said one must be hesitant to extract signals from data on a monthly or quarterly basis, since it does not reflect the long-term trend.
Overall credit growth has continued to moderate in June 2025, with non-food credit growth easing to 9.3% year-on-year, a significant drop from 17.3% recorded in June 2024.
Analysts have highlighted the risks associated with delinquencies and asset quality slippages amid reports of widespread job cuts in the organised sector, and the challenges posed by the deployment of artificial intelligence to individual incomes. Besides, a section of the self-employed professionals and owners of small businesses have reportedly faced income losses, evident in the growing slippages in pockets of bank balance sheets.
'Quality Over Quantity'
"The deceleration reflects cautious lending by banks amid softening demand and increased selectivity toward self-employed and high-risk borrowers," a Care Ratings report earlier this week said. Additionally, a shift toward affordable housing with smaller ticket sizes and slower disbursements has contributed to the muted overall growth."
Analysts said the slowdown in credit can be attributed to a combination of factors, including a high base effect, subdued demand and a cautious approach by banks towards managing the Credit-to-Deposit (CD) ratio.
"Fluctuations will be there. Housing credit overall is doing well," Malhotra said in reply to a question from the media on weak retail loan demand despite the steep reduction in rates in four months. "It may have moderated somewhat but these are to be expected. Overall housing credit is 14% as we speak, which is very good which is more than our average credit growth of 10% for this year."
Latest sectoral data from the central bank shows that until June 2025, growth in mortgages, vehicle loans, credit cards and other personal loans has slowed as lenders have been risk averse due to an uptick in delinquencies especially in unsecured loans and credit cards.
Mortgage growth has slowed to 9.6% in June, down from 18.2% on a year-on-year basis.
Malhotra said one must be hesitant to extract signals from data on a monthly or quarterly basis, since it does not reflect the long-term trend.
Overall credit growth has continued to moderate in June 2025, with non-food credit growth easing to 9.3% year-on-year, a significant drop from 17.3% recorded in June 2024.
Analysts have highlighted the risks associated with delinquencies and asset quality slippages amid reports of widespread job cuts in the organised sector, and the challenges posed by the deployment of artificial intelligence to individual incomes. Besides, a section of the self-employed professionals and owners of small businesses have reportedly faced income losses, evident in the growing slippages in pockets of bank balance sheets.
'Quality Over Quantity'
"The deceleration reflects cautious lending by banks amid softening demand and increased selectivity toward self-employed and high-risk borrowers," a Care Ratings report earlier this week said. Additionally, a shift toward affordable housing with smaller ticket sizes and slower disbursements has contributed to the muted overall growth."
Analysts said the slowdown in credit can be attributed to a combination of factors, including a high base effect, subdued demand and a cautious approach by banks towards managing the Credit-to-Deposit (CD) ratio.
