Credit Growth To Slip To 13-13.5% In FY24: CRISIL

New Delhi, Sept 29 (KNN) Credit growth is seen at 13-13.5% year-on-year(y-o-y) in 2023-24(April-March), lower than nearly 16% y-o-y in 2022-23, CRISIL Ratings said in a report on Thursday.

The growth numbers do not account for the merged entity of Housing Development Finance Corporation and HDFC Bank.

However, the rating agency expects the credit growth to improve to 13.5-14% y-o-y in 2024-25 as the economic growth picks up, reported FE.

While on the basis of the broad-based economic recovery the credit growth had hit 16% y-o-y in 2022-23, the moderation in credit in 2023-24 can be attributed to an expected decline in gross domestic product (GDP) growth in 2023-24, which will impact overall credit growth.

A significant part of growth in wholesale credit in 2022-23 was driven by higher working capital demand in a high-inflation environment.

The easing of inflation in 2023-24 will have a bearing on the demand for working capital from corporates and hence, impact overall loan growth.

With the rise in interest rates, corporates have been tapping the bond market for their financing requirements.

Bank credit’s substitution of debt capital markets, which also supported wholesale credit growth in 2022-23, is unlikely to play out to the same extent this year, the credit rating agency said.

A higher base in the second half of the previous financial year is also expected to reflect in credit growth numbers in the current financial year.

“In fiscal 2025, overall credit growth trends should see a turnaround and start inching up on the back of an expected improvement in GDP growth to 6.9%,” said Krishnan Sitaraman, Senior Director and Chief Ratings Officer, CRISIL Ratings.

Overall loan growth in 2024-25 is expected to be lifted by higher capacity utilisation levels and capital expenditure announcements. On the services side, demand from non-banks should continue to support corporate credit growth as they are themselves seeing decent growth tailwinds, the report said.  (KNN Bureau)