The personal loan segment is expected to sustain its growth momentum in FY25, CareEdge Ratings said in report.
“The medium-term prospects for credit growth look promising with diminished corporate stress and a substantial buffer for provisions. The merger effect is anticipated to dissipate by the end of Q1FY25 and the headline numbers would show the removal of the base effect,” the report said.
CareEdge estimates credit growth to be in the range of 14-14.5% in the current financial year based on gross domestic product forecasts, sectoral credit growth expectations and management expectations.
Gross bank credit offtake rose 20.2% year-on-year in March 2024 propped by the impact of the merger of Housing Development Finance Corporation with HDFC Bank. Excluding the impact of the merger, the growth rate was 16.3% y-o-y.
Personal loans rose 27.6% y-o-y mainly due to the impact of the merger, growth in credit card outstanding, other personal loans, and housing loans.
Credit growth in this segment continues to be driven by significant digitalisation of the ecosystem with increased use of credit bureaus for faster decisions, data collation and validation and e-commerce transactions also leading to miniaturisation of credit.
Within the personal loans segment, all major sub-segments witnessed robust demand during the month, the report said. Excluding the merger impact, loans rose 17.7% y-o-y in March 2024 due to slower growth in vehicle loans and other personal loans, the report said.
Lending to businesses, which includes industry and services segment rose 16.3% y-o-y in March 2024 compared to the 12.5% in March 2023. Excluding the impact of the merger, the growth was higher at 14.6% y-o-y.
On the other hand, the rating agency notes elevated interest rates and global uncertainties pose risks to credit growth. Further ebbing inflation could also reduce the working capital demand, the rating agency said.
