HSBC Raises India's FY27 Loan Growth Forecast to 18% as October Credit Growth Hits 21%, MSME Lending Rises 25%

New Delhi, Nov 11 (KNN) India's credit growth accelerated to 21 per cent year-on-year (YoY) in October, prompting HSBC to raise its loan growth forecast for FY27 to around 18 per cent from 14 per cent earlier, as borrowing strengthened across corporate and micro, small and medium enterprise (MSME) segments.

Corporate lending grew by around 24 per cent, while credit to MSMEs increased by 25 per cent during the month, according to HSBC's latest Asia equity strategy report, cited by ANI.

Deposit growth also accelerated to more than 17 per cent YoY, compared with 12-13 per cent earlier. Improved mobilisation through FCNR(B) deposits also supported banking system liquidity.

The report attributed stronger credit demand partly to higher working capital requirements amid currency weakness and a shift in corporate borrowing from bond markets to bank loans.

Investment and Government Spending Support Demand

HSBC also pointed to signs of a recovery in private capital expenditure, supported by higher imports of capital goods, machinery and electronics, as well as RBI data on fixed capital formation.

Government capital expenditure provided further support. The Centre had spent 42 per cent of its full-year capital expenditure budget by August, compared with 38 per cent in the corresponding period last year. However, HSBC said the pace could moderate as spending normalises against annual targets.

The report also noted that free trade agreements signed in recent quarters were beginning to support exports, which had recently grown faster than services exports for the first time in many years.

Inflation and Rural Demand Pose Risks

HSBC cautioned that rising inflation and weak rural demand could weigh on the outlook. Consumer price inflation reached 5.5 per cent in September, a 23-month high, while deficient monsoon rainfall and low reservoir levels could affect winter sowing and rural consumption.

The report warned that further price increases could begin to erode consumption in coming quarters, even as stronger lending and government investment support economic activity.

(KNN Bureau)