New Delhi, May 8 (KNN) ICRA, a leading credit rating agency, has projected that incremental credit flow to the Indian economy from domestic sources like bonds, bank loans, and commercial paper will temper in the upcoming 2024-25 fiscal year after hitting an all-time high in the current year.

In its annual analysis, the agency estimated total new domestic credit flow will dip to around Rs 24.5 lakh crore in FY2025 from the record Rs 25.4 lakh crore level achieved in FY2024.

However, bond issuances by Indian corporates and institutions are forecast to rise further to Rs 10.6 lakh crore next year, up from Rs 10.2 lakh crore in FY2024.

Sachin Sachdeva, Vice President at ICRA, cited potential constraints like recent regulatory actions on unsecured retail lending and tight banking liquidity that may restrain credit expansion by banks. But he noted conducive conditions should continue driving robust corporate bond issuances in FY2025.

"Growth is expected to taper off gradually from current elevated levels due to tight liquidity, even as foreign inflows into Indian sovereign bonds will remain supportive for corporate bond issuances," Sachdeva stated.

A key driver highlighted was the attractiveness of India's debt capital markets compared to developed nations where interest rates are likely to remain high. This has prompted large Indian corporates to raise more funding through domestic bonds over the past two years.

ICRA estimates the outstanding stock of rupee-denominated corporate bonds will increase by 9.5 per cent year-on-year to Rs 50.3 lakh crore by March 2025. The agency also noted a significant rise in bank lending, especially to retail and non-bank customers, which propelled record non-food credit expansion of Rs 22.3 lakh crore in FY2024.

Overall, the three main domestic credit sources - bonds, bank loans, and commercial paper - facilitated an all-time high incremental flow of Rs 25.4 lakh crore into the Indian economy during the current fiscal year ending March 2024.

(KNN Bureau)