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Sunday, December 10, 2023

Strong bank loan growth in FY23 despite higher interest rates: Fitch


on Monday said India’s bank credit will see strong growth in current financial year despite effects of higher .

It said the strong loan growth should benefit net revenue, particularly as it will be coupled with wider net interest margins.

“We see bank credit expanding by around 13 per cent in FY23, up from 11.5 per cent in FY22. The acceleration will be driven by the normalisation of economic activity after the COVID-19 pandemic, and high nominal GDP growth, which we expect to boost demand for retail and working-capital loans,” Fitch said in a statement.

Fitch forecasts India’s real GDP growth at 7 per cent in 2022-23. It said Indian generally remain open to additional capital-raising to fund growth, despite the rise in rates.

“Private are generally better than state at capital planning, although moves to raise fresh equity are likely to be opportunistic and incremental,” Fitch added.

The rating agency expects greater competition for deposits over time, for example through higher rates on deposit accounts, as banks’ liquidity buffers fall in their pursuit of loan growth.

Fitch expects system deposits to grow 11 per cent in current and next fiscal years, slower than loan growth.

“Increased deposit rates may put some pressure on banks’ margins, but we expect declining credit costs to offset pressures on profitability – including the valuation impact of higher rates on investments – in FY23,” it added.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


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