 "Public sector banks, bank credit")
Rating agency ICRA has revised upwards its projections for bank credit growth for the current financial year (FY24) to 14.9-15.3 per cent from an earlier estimate of 12.8-13.0 per cent on the back of strong offtake in the retail segment and non-banking finance companies (NBFCs).
Anil Gupta, Senior Vice President at ICRA, said the retail credit and bank lending to NBFCs have been strong in the nine months ended December 2023, which has led to the revision. The incremental credit is expected to be Rs 20.4-20.9 trillion as against an earlier estimate of incremental Rs 17.5-17.8 trillion in FY24. This will be the highest ever incremental bank credit growth and would surpass the previous high of Rs 18.2 trillion (growth of 15.4 per cent Y-o-Y in FY23), he added.
Further, ICRA estimates corporate bond issuances to reach Rs 9.6-9.9 trillion in FY2024, crossing the record level of Rs 8.7 trillion seen during FY2023. However, the rating agency cautioned that challenges in deposit mobilisation could temper bank credit expansion to 11.7-12.6 per cent in the next financial year, FY25.
Looking ahead, weaker export demand in certain sectors, softer commodity prices, and challenges in deposit mobilisation could temper bank credit growth in FY25, Gupta said.
Dwelling on the funding of credit growth, ICRA said credit growth is also going to be accompanied by a record incremental deposit mobilisation in FY2024, with the highest ever build-up at Rs 21.7-22.3 trillion. Banks have raised Rs 19.2 trillion in the nine months of the current fiscal ended December 2023. This was driven by a record accretion of Rs 11.2 trillion in Q1 FY24, partially supported by the withdrawal of the Rs 2,000 currency note.
The incremental ask for banks to keep ramping up deposits to bridge the gap with credit growth would remain a challenge, despite the anticipated relative moderation in credit growth in FY25, it added.
