India feels credit squeeze

India is apparently facing its own subprime crisis. Banks have cut back on lending, as the Bank of India has caused real interest rates to rise to around 7%. Loan growth is already down 20% this year, with personal unsecured loans facing the greatest cutbacks.

ICICI, India’s largest bank, has withdrawn entirely from this sector, which was formerly growing at 40% a year. V Vaidyanathan, executive director at ICICI, said ‘we have tightened credit norms across all elements of the credit portfolio. Though the existing book is performing well, its better to be conservative’.

As a result, India’s GDP is now expected to be around 8 – 9% this year. Earlier optimistic expectations of 10% growth now look unrealistic.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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