Bank Loans Could Grow 13.2% In FY24: Icra
Loans of Indian Banks could grow as much as 13.2 per cent in this financial year led by a strong growth in retail loans, rating company Icra reported. But rising funding costs can possibly crimp the profitability of Banks even if their gross bad loans fall on better, Icra said in a report.
The Retail segment is the fastest growing, still, the risks are building up where the possibility of repayment ability of some sections of the borrowers is being tested, it said.
Anil Gupta, group head, Icra said, "Even as the retail segment has performed well, the material weakening of macro-economic conditions could exert pressure on the debt-servicing abilities of borrowers and we remain watchful of its impact on the asset quality of lenders."
"Nonetheless, banks have strong operating profits and capital positions. Consequently, they are much better placed at present for navigating through such a scenario," he added.
Indian banks have been providing retail loans amid increasing data availability of the borrowers and rising incomes even as they reduced lending to companies after they led to a pile-up of bad loans in the previous growth cycle. Retail loan growth is faster than other segments, with its share in bank credit rising to 32 per cent in FY23, from 18 per cent a decade earlier.
The rating company forecasts that gross bad loans can be at a decade-low of 2.8 per cent this year from 3.96 per cent. Credit costs could remain at 1 per cent of advances which should help banks overcome pressure on their profitability.
