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ICICI, India’s largest bank, has withdrawn entirely from this sector, which was formerly growing at 40% a year.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.