Bank Credit Growth To Stay Healthy, But Slip 200 Bps To Around 14%: Crisil

Bank credit growth is expected to moderate by around 200 basis points (bps) to approximately 14 per cent this fiscal after an estimated robust growth of around 16 per cent in fiscal 2024-25 (FY25), according to a recent report by Crisil.

Strong economic activity and retail credit demand drove loan growth last fiscal. This fiscal, growth will be tempered by a high base effect, a revision in risk weights and a somewhat lower gross domestic product (GDP) growth, highlighted the report.

The fundamental drivers of credit demand are broadly intact and a revival in private corporate capital expenditure (capex), especially towards the second half of fiscal 2025, can provide a tailwind.

On the other hand, the pace of deposit growth can keep a check on credit growth, even though the differential between the two has reduced over the past year.

Within the expected overall bank credit growth of around 14 per cent in fiscal 2025, the largest segment, corporate credit (45 per cent of bank credit) should see growth remaining steady at around 13 per cent while retail (28 per cent of bank credit), the second-largest segment, is expected to grow the fastest at around 16 per cent.

Says Ajit Velonie, Senior Director, Crisil Ratings, “Growth in corporate credit will be supported by private sector industrial capex in fiscal 2025, underpinned by expectations that GDP growth will remain solid at 6.8 per cent, although lower than an estimated 7.6 per cent in fiscal 2024. Steel, cement and pharmaceuticals will lead the capex recovery.”

Velonie further added that emerging sectors such as electronics and semiconductors, electric vehicles (EVs) and solar modules will also contribute to capex, especially over the medium term. “The pick-up in capex should offset the impact of lower growth,” he mentioned.