Bank credit growth is likely to be in the range of 14%-14.5% at FY25 end on account of economic expansion, rise in capital expenditure, growth in retail credit and the anticipated expansion in capex spending especially by the private sector.
“The growth is anticipated to be broad-based across the segments. The personal loan segment is expected to continue doing well compared with the industry and service segments. The medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions. This growth would be coming off a high base in FY24 which would impinge marginally on the growth rate,” according to a CareEdge report.
This growth would be coming off a high base in FY24 which would impinge marginally on the growth rate. Further, the HDFC merger effect is anticipated to dissipate by the end of Q1FY25 and the headline numbers would show the removal of the base effect.
However, elevated interest rates and global uncertainties could adversely impact credit growth. Further ebbing inflation could also reduce the working capital demand.
Deposit growth although improving has lagged credit growth for FY24 and consequently is anticipated to play a leading role in FY25 as banks take further efforts to shore up their liability franchise and ensure that lagging deposit growth does not constrain the credit offtake. Further with rate cuts anticipated in the later part of FY25, some amounts might flow back into the banking system thereby improving the CASA ratios to a certain extent.
| Based on GDP forecasts and management expectations, CareEdge estimates the deposit growth to be in the range of 13%-13.5% during FY25. |
Further, as the credit offtake moderates compared to the last year but remains higher compared to the increasing deposit growth, the credit-to-deposit ratio is also slated to continue to remain elevated at above 81% in FY25. PSBs continue to have a lower CD ratio compared to PVBs leaving some headroom for credit growth in the near term, hence PSBs could catch up to a certain extent with the PVBs in the near term. However, branch expansion to source retail deposits would be a key source of competitive strengthPrivate banks surge
The private sector banks (PVBs) have continued to outpace the public sector banks (PSBs). The medium-term prospects look promising with sustained personal loans along with the anticipated increase in capex spending especially by the private sector.
Apart from personal loans (driven by improved digitalisation), the major driver of this growth has been the NBFC segment. The recent period has been marked by a structural shift in the performance of India’s banking sector with the sector seeing a substantial reduction in the overhang of stressed assets. On a y-o-y basis, credit growth generally began picking up in H2FY22 and since then it has continued the momentum with the HDFC-HDFC Bank merger bumping up the headline credit growth number.
ETBFSI now has its WhatsApp channel. Join for all the latest updates.
