Bank credit likely to grow at 4-year high of 11-12% in FY23: Report

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Photo source: PTI

Home loans, which make up the largest share of retail debt, are expected to continue at a tight clip this fiscal year, with residential purchases expected to be the main driver of debt, the agency said.

Highlights

  • In FY 2023, bank credit could rise to a four-year high of 11-12 percent: Report 8
  • Expectations of higher credit growth are also supported by improved resilience of the banking system.
  • Bank Progress in Small, Medium Enterprises (MSMEs) may grow by 12-14 per cent in current financial year

Bank credit could grow to a four-year high of 11-12 percent in 2023 due to improved economic growth and government budget support, a report said.

In fiscal years ending March 2022, bank advances have probably increased by 9-10 percent.

“Healthy economic growth and budget support from the government should increase bank credit growth by 11-12 per cent this fiscal year by 200-300 basis points,” Crisil said in a rating report.

Expectations of higher credit growth are also supported by improved resilience of the banking system, it added.

Krishnan Sitharaman, its senior director and deputy chief rating officer, said the biggest difference expected this fiscal year is the rise in corporate credit growth, which is likely to double to 8-9 per cent.

“The Union budget has set aside about Rs 7.5 lakh crore for public capex outlets, a significant increase over the last financial year, with a sharp focus on public infrastructure. , Be the driver, “he said.

The sectors that should see the most growth in terms of industry dynamics include metals and metal products, chemicals, engineering and construction, he noted.

The report said that bank progress in small, medium and medium enterprises (MSMEs) could grow by 12-14 per cent this fiscal, depending on the multiplier effect from some pick-ups in Capex.

Due to the Emergency Credit Line Guarantee Scheme 2 (ECLGS 2) this segment has seen higher credit growth over the last few quarters.

Home loans, which make up the largest share of retail debt, are expected to continue at a tight clip this fiscal year, with residential purchases expected to be the main driver of debt, the agency said.

At the same time, unsecured loans will also increase slightly as lenders find this segment attractive on the basis of risk-adjusted returns.

“Overall, retail book growth will remain stable at 14-15 percent this fiscal year,” it said.

The growth of agricultural credit, which is expected to increase by 9-10 per cent in FY 2022, will remain stable in the current financial year in anticipation of a normal monsoon.

Crisil Rating Director Shri Narayanan said that the country’s banking sector is structurally strong today, and is in a good position to finance fast credit growth.

“Capital buffers are healthy and have a cushion of at least 100 bps above the regulatory requirements of all public sector banks, while private banks remain firm on this score. Second, profit margins are at a nine-year high.”

Narayanan said sector-level gross NPAs are declining under their asset quality pressure from their 2018 highs to around 500 bps due to improvements in corporate books.

The report, however, said that the resurgence of the Kovid-19 case, the protracted Russia-Ukraine war and the expected slowdown at personal expense should be kept under close scrutiny.

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