Credit growth below Asia & EMEs, banks have room to expand: RBI
credit growth to support economic expansion, a central bank report said, which compared the country's total debt to gross domestic product (GDP) metric with the ratios for both advanced and emerging markets to arrive at what it described as an 'optimal' threshold.
«India's total credit-to-GDP ratio (including credit extended by banks as well as NBFCs) at 90.1% in 2022 was below that of AEs and emerging market economies (EMEs) as well as the estimated threshold (of 113.1%),» said a note published Thursday in the latest report on Trends and Progress in Banking.
«As such, higher credit growth remains supportive of economic growth,» said the report.
The central bank economists estimate a credit threshold of 113.1% of the GDP is an optimal level for credit growth to support economic expansion before higher credit gets diverted for less productive purposes. To be sure, the thresholds could differ from one country to another, said the report.
The research looked into a sample of 16 emerging and advanced economies, and the macro data of the past 21 years were studied.
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