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regular-article-logo Friday, 22 November 2024

Credit growth remains robust despite some moderation: Icra Limited

CPI inflation remains a closely watched metric for analysts having shot up from 4.7 per cent in April to 6.83 per cent in August

A Staff Reporter Calcutta Published 15.09.23, 08:27 AM
Representational image.

Representational image. File photo

Incremental non-food bank credit expansion is expected to moderate to an estimated Rs 17.25 lakh crore (trillion) in 2023-24 from Rs 18.2 lakh crore in 2022-23. Despite the fall, the expansion will still be the second highest in the last decade after last year’s peak when banks dipped into excess statutory liquidity.

“Credit growth remains robust despite some moderation. Even at the anticipated pace of growth for 2023-24, incremental credit expansion would be the second highest, ranging at Rs 16.5-18 trillion next only to the record level of Rs 18.2 trillion last year,” said Anil Gupta, senior vice-president and co-group head, Icra on Thursday.

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“Even as the retail segment has performed well, the material weakening of macroeconomic conditions could exert pressure on the debt-servicing abilities of borrowers and we remain watchful on its impact on the asset quality of lenders. Nonetheless, banks have strong operating profits and capital positions. Consequently they are much better placed at present for navigating through such a scenario,” Gupta said.

CPI (consumer price index) inflation remains a closely watched metric for analysts having shot up from 4.7 per cent in April to 6.83 per cent in August.

“FY23 was different because banks also dipped into their excess SLR to bolster credit. Last year we saw a period where incremental credit was higher than deposit. It remains higher this year also till date. Unless the deposit traction increases significantly, there will always be a bit of pressure on credit,” said Karthik Srinivasan, senior vice-president and group head, financial sector ratings, Icra.

According to RBI’s monetary policy report published in April, excess holdings of statutory liquidity ratio (SLR) securities by banks had moderated to 8.5 per cent of their net demand and time liabilities as on February 24, 2023 from 10.4 per cent at end of March 2022 as banks had funded credit demand by shedding excess investments.

The gap between credit growth and deposit growth has narrowed with credit growth falling from 16.6 per cent in June 2023 to 14.4 per cent in July 2023; in contrast, deposits have only shown a small decline from 12.7 per cent in June to 12.4 per cent in July.

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