Banks are likely to witness a 12%-13% year-on-year (YoY) growth in their overall advances in FY24, compared with an estimated 15%-16% credit growth this fiscal, said a report released by SBI Research on Monday. The
deposit growth is expected to be stable between 10% and 11% for both FY23 and FY24.
“In 2022-23, bank credit growth continues to be strong. As per the fortnightly bank credit data, incremental bank credit till February 24 was at Rs 15.59 trillion. On an YTD (year to date) basis, deposits grew by Rs 13.96 trillion. With economic activity gaining momentum, growth in bank credit for working capital has also caught up in recent months, reflecting an optimistic outlook for demand conditions,” the report said.
However, the persistent increase in repo rates will impact retail borrowers more, as interest cost is passed on to borrowers directly through loans linked to the external benchmark lending rate (EBLR), it added.
According to SBI
SBI’s EBLR-linked loan rates have risen by 250 bps, from 6.65% in March 2022 to 9.15% in February 2023. SBI’s one-year marginal cost of funds-based lending rate, or MCLR, too, has moved up by 150 bps — from 7% in March 2022 to 8.50% at present.
“The rapid increase in EBLR has resulted in banks to either increase the loan tenure or increase in EMI or both, depending on the age of the borrower, tenure of the loan and the residual tenure of the loan,” the report said. Of around 55 lakh home loan accounts linked to EBLR, 47 lakh customers with loans amounting to Rs 8 trillion witnessed an increase in the loan’s tenure, or EMI, or change in both EMI and tenure.
“Estimation of fresh disbursal of home loans… show that on an average the proportion of home loans of up to Rs 30 lakhs, in total loans disbursed, has declined in FY23. Moreover, if we look at above Rs 50-lakh loans, their share has increased, indicating an increasing asymmetry,” the report said.
According to the report, the RBI will likely pause its rate hike cycle in April on account of estimated tapering in inflation next fiscal, receding fear of a global banking contagion and on concerns of a slowdown in the domestic affordable housing market.
“…while concerns on sticky core inflation is justified, it may be noted that average core inflation is at 5.8% over the last decade and it is almost unlikely that core inflation could decline materially to 5.5% and below as post-pandemic shifts in expenditure on health and education and the sticky component of transport inflation with fuel prices staying at elevated levels will act as the constraint. By this logic, the RBI may then have to go for more round of rate hikes,” it said.