Bank credit growth expected to be 8.9-10.2% this fiscal year: report

Banks’ outlook is expected to be stable amid credit growth improving from 8.9 to 10.2 percent and lower provisions for the current fiscal year, ratings agency Icra said on Tuesday. Ratings.

Banks’ gross non-performing advances (GNPA) are expected to decline to 5.6-5.7% by March 2023, from an estimate of 6.2-6.3% by March 2022.

“Icra Ratings expects the outlook for banks to be stable in FY23, based on continued earnings improvement driven by improved credit growth from 8.9 to 10.2 percent in FY23 (8.3% in FY22 (expected) and 5.5% in FY21) and lower credit provisions,” the agency said in a report on Tuesday.

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Credit growth would come from borrowing from the non-food segment, which continues to be driven by the retail and MSME segments, and partly from co-lending agreements with non-bank financial companies (NBFCs), a he declared.

In the wholesale credit segment, growth will be supported by the shift in debt capital market demand towards bank credit in an upside yield scenario, as seen in FY19. The agency expects Treasury revenues to decline significantly in FY23 in a scenario of rising bond yields.

“In terms of asset quality, gross non-performing advances are expected to decline to 5.6-5.7% by March 2023, from an estimate of 6.2-6.3% by March 2022, while net non-performing advances will fall to 1.7-1.8% from an estimate of 2% by March 2022,” said the agency’s vice president, Anil Gupta.

Loans and other provisions are expected to decline to 1.3-1.4% of advances in FY23 from approximately 1.7-1.8% in FY22.

On the other hand, deposit growth is expected to slow to 7.3-7.9% in FY23 from an estimated 8.3% in FY22, Gupta said. In terms of regulatory requirements and growth capital, public sector banks will be self-sufficient in FY23, while additional capital requirements for private sector lenders are estimated at less than Rs 10,000 crore .

The agency said credit growth would reduce excess liquidity in the banking system to Rs 1.5-2.5 lakh crore, and RBI could also suck up excess liquidity. Key growth drivers will be a strong corporate credit ratio, tighter underwriting in the retail and MSME segments, lower bounce rates and improved collections, according to the report.

(Edited by : Jomy Jos Pullokaran)

First post: STI


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