CareEdge Ratings estimates the growth in bank credit to be in the range of 14-14.5% in the current fiscal owing to a broad-based growth across segments, with personal loans outperforming the industry and services sectors.
“Medium-term prospects seem promising with reduced corporate stress and sufficient provision buffer. Further, ebbing inflation could also reduce the working capital demand,” the rating agency said, adding that elevated interest rates and global uncertainties could affect the credit growth.
The growth in credit offtake will also be aided by economic expansion, increased capital expenditure and rise in retail credit.
Excluding the impact of the merger HDFC with HDFC Bank, the gross bank credit offtake rose 16.1% year-on-year to Rs 167.8 trillion as of May 2024.
The services sector witnessed a credit growth of 20.7% in May 2024, marginally lower than 21.3% growth in the year-ago period. This growth was bolstered by increased credit in segments such as commercial real estate, transport operators and professional services. However, the credit growth to NBFCs decelerated compared to the previous year.
The industry segment exhibited a growth of 8.9% in May 2024, compared with 6.0% in May 2023, led by an increase in MSME lending and growth in sectors like infrastructure and textiles.
The growth rate in the personal loans segment declined by around 130 bps to 17.8% in May 2024. Credit housing, the largest segment within personal loans, saw an acceleration, indicating sustained demand in the housing market.