Crisil expects a moderation in bank credit growth to 14 per cent in FY25 from 16 per cent in FY24. Gross advances projected for the year is ₹202 lakh crore in FY25 against ₹172 lakh crore in FY24.

A combination of higher risk weights on consumer credit exposure of commercial banks and credit card receivables as introduced by RBI last November, coupled with slower growth rate of the economy is expected to cool off the credit growth in the ongoing fiscal.

“Regulatory prescriptions we have seen over the last few quarters in the sense that risk weights for key segments like unsecured loans and lending to higher weighted NBFCs (non bank finance companies) have gone up. That have made banks cautious in lending to those segments. So we have seen credit growth in unsecured segments and to NBFCs have come down in the banking sector loan book,” said Krishnan Sitaraman, senior director and chief ratings officer, Crisil said in response to a query from The Telegraph on Tuesday.

“We are also expecting to see some moderation in GDP growth in India for FY25. Our projection is 6.8 per cent against 8.2 per cent last year,” he said.

However, at 14 per cent, credit growth is still among the highs in the last decade.“Last fiscal we had a base effect in terms of credit growth which was in excess of 16 per cent. If we look at the last 10 years, even a 14 per cent credit growth maybe among the top 3 years,” he added.

Crisil has maintained a positive credit quality outlook for banks. “Asset quality metrics are likely to remain benign with gross non-performing assets expected to touch another decadal low. While net interest margins are set to compress 10-20 basis points this fiscal, low credit costs will support banks’ profitability,” Crisil said in a statement.

Gold Loans

Despite RBI cautioning on irregular practices observed in grant of gold loans, Crisil expects a healthy growth rate of 16-18 per cent for this fiscal in terms of assets under management.

“The key reasons is the elevated price level (of gold). While tonnage may not be that high, but because of prices, AUM growth will be higher,” Sitaraman said.

The organised gold loan by banks and NBFCs were estimated to exceed ₹10 trillion in the current financial year.

Ratings trend

CRISIL Ratings credit ratio, or the proportion of rating upgrades to downgrades, increased to 2.75 times in the first half of FY25 from 1.79 times in the second half of FY24.

Credit ratio of ICRA-assigned ratings, stood at 2.2 times in H1FY25 against 2.1 times in FY24.

CareEdge Ratings’ credit ratio, however, moderated to 1.62 times in H1FY25 down from 1.92 times in H2FY24, largely on account of muted performance of small and mid corporates, especially in the export-oriented sector, the ratings agency said. Despite the moderate dip in H1, the credit ratio remained close to the 10 year average of 1.59.