ICRA sees bank credit growth at 12-13% in FY'25
Bank credit growth is expected to remain healthy at 12-13 per cent in the next fiscal, rating agency ICRA said while maintaining a positive outlook on the banking sector. In a statement, ICRA said the positive outlook on the banking sector is mainly driven by comfortable asset quality levels, with both corporate and retail portfolios performing well in terms of delinquencies, resulting in limited net-NPA additions.
«Furthermore, credit growth is expected to remain healthy at 12-13 per cent in FY 2025 (16.5 per cent YoY as on December 1, 2023 and 15.4 per cent in FY2023), driven by strong demand in the services and the retail segments,» it said.
These factors, ICRA added, are likely to be offset by the continued upward repricing of the deposit base in H2 FY2024, leading to compression in interest margins.
While this repricing is likely to mostly happen by the end of 2023-24, the expectations of a rate cut from August 2024 could start a downward pressure on lending yields and hence pressure on interest margins may continue during the next fiscal.
«Despite this, we expect the operating profits for banks to remain steady supported by the loan growth, however, operating profitability levels would witness a mild moderation and stabilise at 1.8-2.0 per cent in FY2024-FY2025 compared to 2.2 per cent in FY2023,» it said.
Aashay Choksey, Vice President, ICRA said that incremental credit expansion has been robust so far at Rs 15.5 lakh crore (for FY2024 till December 1, 2023), against Rs 18.2 lakh crore in the last financial year.
«However, as we look beyond this year, credit growth is likely to come off as tight liquidity conditions would eventually weigh down on growth,» he said.
