Bank credit growth expected to be at 8.9-10.2 pc: ICRA

Mumbai: The outlook for banks is expected to be stable amid an improvement in credit growth of 8.9-10.2 percent and a decline in provisions in the current fiscal, rating agency Icra Ratings said on Tuesday.

Gross Non-Performing Advances (GNPAS) of banks are expected to decline to 5.6-5.7 percent by March 2023 as against an estimate of 6.2-6.3 percent by March 2022.

"ICRA Ratings expects the outlook for banks to be stable in FY23, based on continued improvement in earnings. driven by improved credit growth of 8.9-10.2 percent in FY23 (8.3 percent for FY22

(expected) and 5.5 percent in FY21) and decline in credit provisions," the agency said in a report on Tuesday.

Credit growth would come from non-food segment borrowing, which continues to be driven by retail and MSME segments, and partially by co-lending arrangements with non-banking finance companies (NBFCs), it said. In the wholesale credit segment, growth will be supported by demand, shift from debt capital market to bank credit in a rising yield scenario as was seen in FY19.

The agency expects treasury income to decline materially during FY23 in a rising bond yield scenario."In terms of asset quality, the gross non-performing advances are expected to decline to 5.6-5.7 percent by March 2023 as against an estimate of 6.2-6.3 percent by March 2022, while the net non-performing advances will decline to 1.7-1.8 percent as against estimate of 2 percent by March 2022," the agency's vice president Anil Gupta said.

Credit and other provisions are estimated to decline to 1.3-1.4 percent of advances in FY23 as against an estimated 1.7-1.8 percent in FY22.

On the other hand, the de- posit growth is expected to slow down to 7.3-7.9 percent in FY23 as against 8.3 percent estimated in FY22, Gupta said. In terms of regulatory and growth capital requirements, public sector banks will be self-sufficient in FY23, while the incremental capital requirement for private-sector lenders is estimated at less than Rs 10,000 crore.

The agency said credit growth will reduce liquidity surplus in the banking system to Rs 1.5-2.5 lakh crore, and RBI may also suck out surplus liquidity.

Major growth drivers will be a strong corporate credit ratio, tightened underwriting in retail and MSME segments, reducing bounce rates, and improving collections, the report said.

Source- PTI.