The year-on-year growth in bank credit to individuals against shares and bonds was at a 19-month low in August, according to the sectoral deployment data released by the Reserve Bank of India.
Loans to shares and bonds grew merely 0.9% on year to Rs 9,807 crore during the month under review, compared to a 26.8% growth in the year-ago period.
Market caution and stricter oversight subdue growth
In April, loans to this segment touched a high of Rs 10,488 crore. They fell by 10.3% in May. The growth has been subdued in the segment since June. The slowdown was mainly driven by a fall in the benchmark indices amid tariff uncertainties and stricter regulatory oversight from the central bank.
“This segment saw a muted demand, possibly due to subdued equity market performance and risk appetite among lenders and borrowers. Regulatory factors such as mandated loan-to-value (LTV) ratios and conservative lending limits have also curtailed aggressive loan deployments,” a senior official at an NBFC said.
RBI move to enhance liquidity and investor awareness
On Wednesday, while announcing the outcome of the monetary policy committee meeting, the central bank announced a slew of measures for the banking sector, one of them being a proposal to raise the limit of loans against shares from Rs 20 lakh to Rs 1 crore per individual. It also gave a fillip to the initial public offering segment by increasing the loan limit from Rs 10 lakh to Rs 25 lakh. It also removed the ceiling on lending against debt securities.
“It’s ridiculous how many people holding stocks continue taking personal loans or using credit cards at much higher rates — credit cards can go up to 40%+. Even at Zerodha Capital, we see this constantly. People just aren’t aware they can replace high-interest debt with LAS (loan against securities), which is one reason our book is still only Rs 450 crore,” Nithin Kamath, founder and CEO of Zerodha, posted on LinkedIn on Thursday.
CareEdge in its report said with enhanced limits, investors, including high-net-worth individuals (HNIs), family offices and funds, are likely to benefit from improved liquidity against their holdings.