ReportWire

Tag: credit growth

  • Credit growth surpasses deposits in early September, retail loans to drive FY26 expansion

    Credit growth in the banking system outpaced deposit growth in the fortnight ending September 5, but still trailed the pace of expansion in the corresponding period last year.

    Data published by the central bank Thursday showed credit growth stood at 10.3% YoY, higher than the deposit growth of 9.8% YoY.

    Loan growth moved above 10% in late July but it has remained low compared to 13-14% growth reported in the same period last year. Meanwhile, deposit growth has dropped below 10% for the first time since the end of May 2025, Reserve Bank of India (RBI) data showed.

    According to CareEdge Ratings, the slowdown reflects both softer momentum and a high base effect.

    “The moderation was partly driven by muted private sector capex, slower lending to corporates and unsecured personal loans, along with weaker credit flow to NBFCs,” it said.

    Lenders are gearing for the pickup in credit demand, particularly in the retail segment, in the festival season. Combination of easy liquidity conditions coupled with government’s steps such as GST rate cuts is expected to boost consumption, thereby pushing credit demand in the second half of the financial year starting October.

    CRISIL Ratings peg credit growth in the banking system at 11-12% for FY26. Retail credit, which comprises roughly one-third of bank loans, is expected to grow higher at ~13% this fiscal from ~11.7% last fiscal.

    “The better performance of newer unsecured portfolios, which have benefited from stricter underwriting standards introduced by lenders, should be a growth positive. Home loans remain the largest constituent of retail credit (>50%) and growth here will benefit from lower interest rates,” it said in a note dated September 15.

    Add ET Logo as a Reliable and Trusted News Source

    Source link

  • Credit growth in India expected to exceed nominal GDP this fiscal: SBI Capital Markets

    Credit growth in India expected to exceed nominal GDP this fiscal: SBI Capital Markets

    Credit growth in the Indian banking sector is expected to exceed nominal GDP growth in the current financial year 2024-25, growing at 13-15 per cent, according to SBI Capital Markets.

    Nominal gross domestic product (GDP) is growth, without adjustment for inflation. The growth according to the report would be amplified by long-term drivers such as buoyant economic growth, accompanied by formalisation, digitalisation, and premiumisation.

    Higher capacity utilization across sectors leading to capex, pick-up in MSME credit, and increased infrastructure and construction activity are expected to boost the industry segment, potentially achieving high single-digit growth in 2024-25, surpassing 2023-24’s performance SBI Capital Markets, incorporated in 1986 as a wholly owned subsidiary of the State Bank of India, is one of the oldest investment banks in India.

    “While PSBs (public sector banks) continue to lose share to PVBs (private sector banks), the pace has come down to a trickle as the former are now armed with well-capitalized balance sheets, and a war chest of deposits,” said the report released by SBI Capital Markets earlier this week.

    Terming banks as the beating heart of the Indian economy, the report said they are seeing excellent blood flow — record high profits and superlative credit growth. “With the blocks of bad assets cleared, asset quality and capital are in the pink of health.

    The question arises – will credit growth continue amidst countercyclical operations by RBI, or will there be a shortage of the lifeblood – deposits? Will vitals (asset quality, capital) remain stable, and can the profit pulse race further up?” SBI Capital Markets analysed some of these aspects in the report.

    Industry credit has grown at a CAGR (compound annual growth rate) of 5 per cent in the past five fiscals, slower than overall bank credit of CAGR 10 per cent. Interestingly, NBFC credit growth continues to outpace bank credit growth.

    The slow credit growth, it said, is as large private corporates are eschewing bank credit – their capex is being funded by copious profits, capital markets attracted by their healthier books, and through financial tie-ups with global capital-rich partners.

    “Infrastructure projects are increasingly funded by key financial institutions in early stages and capital markets (bonds, InvITs) for operational projects. Government capex is primarily funded by Budgetary allocations with some MLI assistance. These factors have limited the growth of bank infrastructure loans to a per cent 5 per cent CAGR in recent years.

    Proposed project loan provisions may extend this period of moderate growth,” it said. These developments have prompted the regulator to take countercyclical measures and boost risk weights for certain categories of credit within personal loans as well as loans extended to (and by) NBFCs.

    This could have a minor impact on capital ratios, and growth in these segments tapered down slightly in the second half of 2023-24.

    Source link

  • Banks’ margins to shrink but loan growth, lower credit cost to aid PAT

    Banks’ margins to shrink but loan growth, lower credit cost to aid PAT

    Banks profitability in seen moderating in Q4 FY24 to around 10 per cent y-o-y, on the back of muted NII (net interest income) growth and further shrinking of margins.

    Margins are expected to shrink 3-12 bps on quarter due to increase in banks’ cost of funds, decline in credit to deposit ratio, and back-book deposit re-pricing, according to analysts.

    “Deposit growth has picked-up to 13.5 per cent yoy due to RBI’s nudge on higher systemic LDR. However, such growth has come on the back of high-cost retail and bulk deposits, which coupled with some moderation in LDR and unsecured loan growth, could put pressure on margins in Q4,” Emkay Global Financial said in a note.

    Sequentially, the profitability is seen improving to about 17 per cent due to lower opex for state-owned banks, AIF relief for private sector lenders, and treasury gains owing to softening gilt yields.

    HDFC Bank will kickstart the Q4 earnings season for banks on April 20. ICICI Bank, Axis Bank, IndusInd Bank and RBL Bank are the favourite among private banks.

    Kotak Mahindra Bank is seen weighed down by management transition in the near-to-medium term. For HDFC Bank, a sharp reduction in LRD is seen weighing on margins, which coupled with higher opex could off-set the positive impact from the sale of HDFC Credila stake. Indian Bank, Punjab National Bank and State Bank of India are the top picks among PSU banks.

    Credit, NII growth

    “Pre-result updates suggest broad-based sequential traction in credit, which has so far been strong, driven by services and retail segment. Outlook on credit growth will be important as liquidity gets tighter, and on RBI’s action on unsecured retail loan and loan to NBFCs,” Phillip Capital said.

    Provisional Q4 numbers reflect strong business momentum for private banks with sequential loan growth of 3-5 per cent and deposit growth of 5.7-6.7 per cent. Public banks’ sequential loan growth was 3-4 per cent whereas deposits grew 4-5 per cent. Overall, system loan growth is seen at over 15-16 per cent y-o-y and 4 per cent q-o-q, and deposit growth at 5.3 per cent.

    There has been some moderation in retail credit, especially credit cards and personal loans, partly due to seasonal factors and the regulatory increase in risk weights, Emkay Global said, adding that some temperance is also seen in vehicle finance and gold loans.

    NII is seen growing 4.4 per cent on year and 1.8-2.8 per cent on quarter. Within this, private banks’ NII is seen up 7.2 per cent y-o-y and 3.2 per cent q-o-q whereas for PSU banks is seen 0.9 per cent higher y-o-y and 2.1 per cent q-o-q.

    Asset quality

    Led by contained slippages, accelerated write-offs and strong provisioning buffers, gross NPA ratios of banks are seen moderating to around 2.0-2.7 per cent from 2.9 per cent in the previous quarter. The net NPA ratio is seen declining to around 0.5 per cent, analysts said.

    “Banks are likely to witness yet another strong quarter in terms of asset quality; however, we remain vigilant of any pockets of stress in the unsecured portfolios. Slippages should remain under control and asset quality improvement will continue, driven by healthy recoveries. Credit costs are likely to remain at normalised level,” Axis Securities said in a pre-earnings note.

    Phillip Capital expects credit cost to be at 40 bps in Q4 compared with 44 bps in Q3 and 1.1 per cent in the year ago period, and Prabhudas Lilladher expects the gross slippage ratio to decline 9 bps q-o-q to 1.15 per cent, as large banks had witnessed increase in agriculture slippages in Q3 FY24.

    Source link

  • Bank of India plans share sale to meet SEBI’s minimum public holding norms

    Bank of India plans share sale to meet SEBI’s minimum public holding norms

    State-owned Bank of India is exploring the possibility of share sale to investors over the next one year to meet the minimum public holding requirement of 25 per cent.

    Currently, Indian Government holds 81.41 per cent stake in the Mumbai-based bank.

    “We are exploring options to meet SEBI’s minimum public holding requirement. However, the decision to sell shares would depend on market conditions,” Bank of India Managing Director Rajneesh Karnatak told PTI.

    Public sector banks have time till August 2024 for meeting the Securities and Exchange Board of India (SEBI) requirement, he said.

    Post share-sale, depending on the quantum, the holding of Indian Government would come down below 75 per cent.

    With regard to the bank’s growth, he said, credit growth is expected to be 11-12 per cent during the current financial year helped by retail, MSME and agriculture loans.

    As far as the deposit is concerned, he said, “We hope to grow the liability side by 10 per cent during the current financial year.” Asked about the resource mobilisation plan of the bank, he said, Capital Adequacy Ratio of the bank stood at 16.28 per cent in March 2023 and this should be enough to take care of loan growth during the year.

    However, the board has given its approval to raise capital aggregating up to ₹6,500 crore in FY24 through bonds.

    As per the board approval, the bank can raise up to ₹4,500 crore from follow-on public offer/ qualified institutional placement/rights issue/preferential issue and/or Basel III compliant additional tier-1 (AT-1) bonds while remaining ₹2,000 crore via Basel III compliant Tier-2 bonds in one or more tranches.

    It will be done when the need arises and market conditions are conducive, he added.

    Karnatak while addressing a town hall meet here on Wednesday asked officers and staff to focus on Current Account Savings Account (CASA) mobilisation and increase non-interest income.

    He said the bank is working towards aligning its IT and digital banking products to keep pace with digitalisation and enhanced customer experience.

    Karnatak, in presence of Field General Manager Prashant Thapliyal and head government business D S Shekhawat, said every employee should focus on customer satisfaction and improving efficiency.

    Source link

  • Deposits outpace credit growth after months

    Deposits outpace credit growth after months

    Incremental deposit growth outstripped credit growth for the first time in the last few months in the fortnight ended November 4 as banks aggressively raised deposit rates to garner resources in the wake of robust credit growth.

    Incremental deposits of all scheduled banks grew by ₹1,68,386.7 crore in the fortnight ended November 4, according to RBI data. During the same period, incremetal credit rose by ₹44,119.16 crore.

    In the preceding fortnight ended October 21, incremetal credit was up by ₹26,610.67 crore while deposits de-grew by ₹64,098.13 crore.

    Related Stories
    HDFC Bank mulls adding over 100 branches in Kerala; to create 1,000 jobs

    Recently HDFC Bank opened its 250th branch at Perumbavoor town in Ernakulam district

    As per RBI data, as on November 4, interest rate on term deposits of over one year duration was higher in the 5.50/7.25 per cent band against 5.50/6.50 per cent as on October 21, 2022.

    That deposit growth is lagging credit growth is underscored by the fact that as on November 4, year-on-year (y-o-y) deposit growth and credit growth stood at about 8 per cent and 16.81 per cent, respectively.

    It may be pertinent to mention here that Issues relating to lagging growth in deposits vis-à-vis credit growth and asset quality, among others, were discussed at RBI Governor Shaktikanta Das’ meeting with top bankers on Wednesday.

    S&P Global Ratings, in its Global Bank Outlook report, said loan growth for banks in India is expected to stay somewhat in line with the trajectory of nominal GDP, and loan growth to the retail sector will continue to exceed that of the corporate sector.

    Corporate borrowing up

    “Corporate borrowing is also picking up momentum, but the uncertain environment may delay capital expenditure-related growth. A shift to bank funding from capital market funding is also driving a pickup in corporate loan growth.

    “Deposits may find it hard to keep pace, leading to a weakening in the credit-to-deposit ratio. But the ratio has improved in the past few years. Banks’ funding profiles to remain sound, supported by strong deposit franchise,” said Deepali V Seth Chhabria, Primary Credit Analyst, S&P Global.

    BL Mumbai Bureau

    Source link