Backed by healthy economic growth and budgetary support from the government, bank credit growth is set to move up by 200-300 basis points to 11-12 percent in FY 23, estimated credit rating firm CRISIL in its latest market analysis.
The estimate bakes in CRISIL’s forecast of 7 per cent plus gross domestic product (GDP) growth in the current financial year. Krishnan Sitaraman, senior director and deputy chief rating officer at CRISIL Ratings, said that the biggest difference this year is the potential of corporate credit growth which looks set to double to 8-9 per cent.
“The Union Budget pegs public capex (capital expenditure) outlay at around Rs 7.5 lakh crore, a significant increase over last fiscal, with a sharp focus on public infrastructure. The downstream impact of this on core sectors, along with the Production Linked Incentive (PLI) scheme announced for 13 key sectors, will be the drivers. Sectors that should see the maximum growth, given their industry dynamics, include metals and metal products, chemicals, engineering and construction,” Sitaraman added.
The estimates are in sharp contrast to corporate credit growth’s recent year performances. Corporate credit which accounts for nearly 40 per cent of bank credit in India, grew very slowly, even dipping into negative territory in fiscal 2021, as capex remained muted and banks remained reluctant to lend following asset quality challenges.
CRISIL estimates bank credit to micro, small and medium enterprises (MSMEs) to grow at 12-14 per cent, riding on the multiplier effect from some pick-up in capex. MSME segment has witnessed a higher credit growth in the past year and is likely to have the same trajectory, benefiting from the government’s Atmanirbhar Bharat initiative and the impact of schemes such as the PLI.
Home loans, which form the largest chunk of retail lending, are also expected to see good growth in the current fiscal year. Meanwhile, CRISIL also expects unsecured lending to see some surge as the lenders continue to find this segment attractive on a risk-adjusted return basis.
Collectively, the retail book growth will remain steady at 14-15 per cent.
Agricultural credit growth, which was estimated to grow at 9-10 per cent in the last financial year banking on a decent monsoon and good harvest season,is expected to grow steadily in this fiscal once again.
The higher credit growth expectation is also backed by the improved resilience of the Indian banking system. CRSIL said that while the overall growth judgement is positive, there are factors that individually or collectively may impact its base-case estimates.
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