News & Analysis

RBI’s August Data Suggests Revival in Consumption

One of the key metrics that suggests an uptick is the UPI platform where transactions rose during August, considered a seasonal demand trough

Data shared by the Reserve Bank of India (RBI) suggests that in spite of August being a seasonal trough for consumer demand, payments made through the UPI platform reached record levels. The data put total UPI-based transactions at more than Rs.10.7 lakh crore during the month, representing a whopping 68% increase over a year ago. 

This indicates a strong revival in consumption, following close to two years of dampened sentiments over the pandemic-led economic slowdown and the subsequent challenges around supply chains that impeded manufacturing output. The data also noted that credit card loans stood at Rs.1.62 lakh crore, again suggesting renewed spending. 


Record UPI transactions in August 2022

The retail payments platform processed 6.57 billion transactions during August, which is an 85% spike over the same period last year. Experts say that revival trends were visible from April itself around a steady increase in both credit card issuance and spends. This also indicates a growth in eCommerce transactions following season-specific sales organized by big online retailers. 

In fact, another interesting trend observed from the RBI data is that credit card spends were on a northward journey, a welcome break after what we saw for most of 2020 and a good part of 2021. Credit card spends rose 54% year-on-year in August while those using debit cards to make their purchases only rose by 6%. 


Home loans are also back in business

The data also suggested  that home loans comprise the biggest chunk of household debt as on July 31, 2022. This is closely followed by credit card payments, which spiked up from Rs. 1.3 Lakh Crore a year ago to Rs.1.6 Lakh Crore in the period under review. 

Home loan outstandings was pegged at Rs.17.7 Lakh Crore, which however, still accounts for just 14.34% of banks’ overall credit as against 14% reported at the end of July last year. However, this number could witness a further upward spike after the merger of HDFC Bank and HDFC, with the total outstanding from this segment expected to touch Rs.21 Lakh Crore. 

The data also revealed that bank credit grew at 14.52% to Rs.123.69 Lakh Crore while the deposits grew 9.14% to Rs.169.72 Lakh crore during the fortnight ended July 29, 2022. Market experts opine that this pick up in the personal loan segment is a clear indication that consumption is slowly returning to normal after the slowdown witnessed during the pandemic. 

Consumer loans surged 16.5% since the end of March this year while loans against fixed deposits grew 11.8% during the same period. However, there is some cause for concern around the industrial loans segment which saw subdued credit growth as the infrastructure sector performed better than the traditional gems and jewellery and edible oils. 

Economists expect the growth momentum to continue further in the next few months, buoyed by the upcoming festive season. In fact, many banks and lending agencies are launching customized retail loan products for Dussehra and Diwali purchases, given that the industry output appears to be growing. 

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