Healthy economic activity and budgetary support from the government would lift the bank credit growth by 200-300 basis points to 11-12% in the current fiscal ( FY23), according to CRISIL.
Krishnan Sitaraman, Deputy Chief Ratings Officer, CRISIL Ratings, “The biggest difference we expect this fiscal is the upshift in the corporate credit growth trajectory; we see it doubling to 8-9 per cent.”. The Union Budget pegs public capex outlay at around Rs 7.5 trillion, a significant rise over last fiscal, with sharp focus on public infrastructure.
The downstream impact of this on core sectors, along with the Production Linked Incentive (PLI) scheme announced for 13 key sectors, will be the drivers. Sectors that should see the maximum growth, given their industry dynamics, include metals and metal products, chemicals, engineering and construction, rating agency said.
This is in sharp contrast to recent years when corporate credit, which accounts for 40 per cent of bank credit, grew very slowly. It even dipped into negative territory in fiscal 2021 as capex remained muted and banks chary of lending following asset-quality challenges, CRISIL said.
The estimate factored a forecast of over seven per cent growth in gross domestic product (GDP) this fiscal.
Bank credit to micro, small and medium enterprises (MSMEs) could grow 12-14% this fiscal, riding on the multiplier effect from some pick-up in capex. This segment had seen higher credit growth in the past few quarters because of government guarantee backed emergency credit .
MSMEs are expected to play an important role in the government’s Atmanirbhar Bharat initiative, and will also benefit from the flow-through impact of schemes such as the PLI.
Home loans, which form the largest chunk of retail lending, will be a major driver of credit with residential purchases expected to continue at a solid clip this fiscal. At the same time, unsecured lending will also see some surge as lenders continue to find this segment attractive on a risk-adjusted return basis. Overall, the retail book growth will remain steady at 14-15% this fiscal.
Agriculture credit growth, estimated at 9-10 per cent in the last fiscal on the back of a decent monsoon and a good harvest, is seen steady, with monsoon expected to be normal once again this fiscal, CRISIL added.