Car sales, a major indicator of the economy's health, fell an annual 6.6 per cent in October, the third decline in four months.

"There has been significant moderation in retail credit disbursal," Abheek Barua, chief economist of HDFC Bank, India's second largest private bank, said.

"Consumer credit has fallen in the past 6-7 months because of very high rates and with banks becoming more careful about any spike in non-performing assets."

PAYING FOR PAST EXCESS

Just a year ago things were very different.

According to Goldman Sachs, Indian consumers' growing appetite for cars, computers or clothes during the past eight years accounted for nearly as much growth in global demand as the United States, and triggered huge demand for credit.

Total loans, including mortgages and unsecured loans such as credit cards, grew around 30 per cent annually in the last three years, an expansion the central bank called "unprecedented".

But now the strain of the global slowdown is reflected in most banks raising their loan-loss provision, while overextended Indians find themselves in the whirl of revolving credit.

The largest among Indian private banks, ICICI, a major player in consumer credit markets, raised its bad loans provision to 1.91 per cent of net advances from 1.43 per cent a year ago. Retail credit is the biggest contributor to its bad loans.

According to ratings agency Crisil, a unit of Standard & Poor's, Indian banks' consumer loans are now likely to be major risk areas as bad debts are expected to rise to four per cent of advances by 2009.

... contd.