New Delhi: In a clear sign of improvement in the economic activity, personal loans and industrial loans recorded solid growth in December last year as consumers and industry borrowed more money but a rise in loans against gold also highlighted the weak financial position and cash flow problems of Indian households due to the adverse economic situation caused by the Covid-19 pandemic as they resorted to mortgaging family jewellery to raise loans.
According to the official data shared by the ministry of finance, while personal loans recorded a growth of 14.3% in December 2021, industrial loans recorded a growth of 7.6% in the month. However, two segments within the industrial loans, loans to medium industries and the MSME sector recorded very strong growth during the month. While industrial loans to the medium industry grew by 86.5% in December in comparison with the growth during the same month last year, loans to the MSME sector also grew by 20.5% in December on a year-on-year basis.
The Finance Ministry said the personal loans segment continued to expand robustly, growing by 14.3 per cent in December 2021 vis-à-vis 11.6 per cent in the preceding month, in the monthly economic report for January this year which was released on Wednesday.
"The growth was primarily led by an increase in loans for consumer durables, loans against gold and other loans. As consumer demand continues to firm up, credit growth to this segment is expected to be robust and sustainable,” said the ministry.
Rise in gold loans is a cause of concern
The report, however, also pointed out a disturbing trend in the month of December last year, the increase in loans against gold. It said the increase in loans against gold may indicate a strain on individual incomes and cash flows.