credit enhancement The current fiscal has so far come in at around 18 per cent, a decade high.
Already, large lenders have seen corporates flock to banks for capital expenditure and for working capital as the demand side of the economy is better.
State Bank Of India It has the best corporate loan sales in Q2 registering a growth of 20 per cent and so did most other lenders including private sector banks.
Bank credit The financial years 2023 and 2024 are witnessing a growth of 15 per cent per annum, CRISIL said in a report.
The agency said its forecast was an estimated 7 percent . based on Gross Domestic Product Growth in this fiscal year, as well as the expected continuation of the credit push from the government’s infrastructure spending, higher working capital demand in an environment of high inflation, and some replacement of debt capital market borrowings.
The report acknowledged that even if growth moderates in the next fiscal (the consensus is around 6 per cent or less), it will be on a higher basis, with limited impact on credit demand.
Over the past four-five years, the report said, asset quality challenges have resulted in higher gross non-performing assets, the RBI has placed many banks under prompt corrective action (PCA) framework, and limited capital buffers have slowed credit growth. particularly the public sector banks.
But now after a significant clean-up and balance sheet strengthening as well as substantial equity infusion, state-run banks are eyeing higher growth. As a result, their credit growth is seen at 12 per cent in the current financial year and is less than the expected 17 per cent for private banks the next, the report said.
The agency expects credit growth this year to be driven more by the retail and MSME segments, while corporate credit could be a major contributor in the next fiscal.
According to Krishnan Sitaraman, a senior director of the agency, corporate credit, which accounts for 45 per cent of total credit, may grow at a two-year compound annual growth rate of 10-12 per cent till March 2024, after a mere 3 per cent. Is. Percentage between FY 2019 and 2022.
This year, the corporate loan book has been revised upwards to a higher . have been fueled by additional working capital requirements due to inflation He said the move from bond markets to bank loans given interest rate volatility, on the other hand, should see a revival in private sector capital expenditure in the next fiscal, which then becomes the key driver for higher corporate credit growth, he added. Will go
Retail loans, which account for 26 per cent of total advances, are expected to grow the fastest at 17-19 per cent, driven by home loans, the largest sub-segment, despite rising interest rates and real estate prices.
Unsecured retail loans, which were muted during the pandemic, have started rising again as it remains an attractive segment for banks. However, the impact of continued increase in interest rates on retail credit demand needs to be seen, he cautioned.
The MSME segment is expected to grow at a reasonable rate of 16-18 per cent this fiscal and next fiscal, while farm credit growth is expected to be around 10 per cent, supported by a moderately normal monsoon and harvest.
While credit growth this fiscal so far has been high, it should moderate in the second half and see the full year close with a growth of 15 per cent. In fact, in FY22, over 90 per cent of incremental credit was added in the second half of the year.
According to Subha Sree Narayanan, a director of the agency, a key monitoring factor in this high credit growth environment will be whether deposit growth can keep pace. A trend reversal has been observed over the past few months with credit growth running ahead of deposit growth. Moreover, surplus liquidity in the system is returning to normal, forcing banks to raise deposit rates at a faster pace.