Credit growth for banks to slow to 12 per cent in FY25: ICRA

While the FY25 fig includes the interaction of merger of HDFC Limited and HDFC Bank, the FY24 fig excludes the impact.

For the NBFCs, the maturation successful assets nether absorption (AUMs) is expected to dilatory down sharply to 16-18 per cent successful FY2025 from 25 per cent successful FY2024.

The stock of the retail conception and the NBFCs successful the incremental recognition travel of banks declined to 42.9 per cent successful 12 months ending August 2024 from 48.9 per cent for the corresponding play of the erstwhile year, driven by slower travel of recognition to the NBFCs.

As a sizeable information of slope recognition travel to the NBFCs is towards on-lending to the retail segments, wide recognition to the retail conception whitethorn dilatory down successful the adjacent 12-18 months.

The standing bureau said portion the request for retail recognition remains strong, the regulatory nudge to forestall overheating successful definite segments successful the retail abstraction is the cardinal origin driving slower growth.

In November past year, the RBI had raised hazard weights connected the vulnerability of banks towards user credit, recognition paper receivables and non-banking concern companies (NBFCs) by 25 per cent to up to 150 per cent. Risk value refers to the superior banks support speech arsenic provisioning to screen immoderate indebtedness defaults.

“The regulatory measures to dilatory down slope recognition maturation volition beryllium important for banks to chopped their deposit rates, erstwhile the complaint chopped rhythm starts,” said Anil Gupta, Senior Vice President & Co-Group Head – Financial Sector Ratings, ICRA.

The standing bureau said that the precocious recognition maturation during the past 2 years successful the retail segment, crossed the lenders, has perchance resulted successful implicit leveraging successful immoderate plus segments, and a slower recognition maturation tin impair the refinancing quality of immoderate of these borrowers, arsenic the lenders go hazard averse.

Such tightening often results successful weaker borrowers falling down successful their repayments schedule, thereby expanding the plus prime unit for the lenders.

Loan segments, which person precocious lending rates oregon marginal borrower profiles, similar microfinance, idiosyncratic loans, recognition cards oregon unsecured concern loans, are already showing a emergence successful delinquencies, it said.