Bank Credit Growth To Remain Healthy, With Moderate Pace: Crisil

Bank credit growth is projected to ease by 200 basis points to 14 percent this year, following robust growth of 16 percent in the previous fiscal year, as per Crisil Ratings. The strong loan growth last year was driven by vigorous economic activity and demand for retail credit. However, this year’s growth is expected to be moderated by factors such as a high base effect, revisions in risk weights, and somewhat lower gross domestic product (GDP) growth, according to Crisil.

Despite these factors, Crisil highlights that the fundamental drivers of credit demand remain largely intact. A potential revival in private corporate capital expenditure, particularly in the latter part of 2024-25, could provide some positive momentum. In terms of specific segments, corporate credit, constituting 45 percent of bank credit, is anticipated to maintain steady growth at 13 percent. On the other hand, retail credit, representing 28 percent of bank credit, is projected to be the fastest-growing segment at 16 percent.

Ajit Velonie, Senior Director at CRISIL Ratings, mentioned that the growth in corporate credit will be supported by private sector industrial capex in the fiscal year 2025, backed by expectations of solid GDP growth. Retail credit, while likely to see a slight dip from 17 percent to 16 percent, will remain a key growth driver for banks. This segment may experience lower growth in unsecured consumer credit due to strategic realignments by banks in response to regulatory advisories aimed at mitigating potential loan delinquencies.

The home loan sector, a significant part of retail credit, is expected to grow steadily, driven by increased interest in home ownership and improved affordability. Agricultural credit growth, tied to monsoon patterns, is anticipated to moderate following a robust financial year 2023-24.

The onset of the southwest monsoon, forecasted by the India Meteorological Department to hit Kerala around May 31, is crucial for the Indian agriculture sector, particularly for kharif crops. These rains play a vital role in sustaining the agricultural economy across India’s three cropping seasons.