Personal Loan Demand Drove Credit Growth in Q4FY22-23: Report
Driven by personal loan demand, the credit offtake from banks rose by 16.3% year-on-year (y-o-y), while the deposits grew slower at 10.2% during the last quarter of FY22-23, Credit Rating agency CARE Ratings said in a report.
According to the credit rating agency, the growth of credit over deposit can be attributed to the base effect as earlier in the pandemic, deposit growth had outpaced credit.
The personal loans segment has remained the largest segment, along with non-banking finance companies (NBFCs), while the industrial sector reported muted growth.
In Q4FY22-23, credit outstanding of private banks (PBs) grew by 19.1%, public sector banks (PSBs) by 14.8% and small finance banks (SFBs) by 36.3%
PBs outperformed PSBs in Q4FY22-23, which is expected to continue, due to the aggressive acquisition of clients and offering of higher interest rates on deposits.
According to CARE Ratings, the medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions. This growth would be coming off a high base in FY22-23 which would impinge marginally on the growth rate.
Based on gross domestic product (GDP) forecasts, sectoral credit growth expectations and management expectations, CARE Ratings estimates the credit growth to be in the range of 13%-13.5% during FY23-24 excluding the impact of the merger of HDFC with HDFC Bank. Including the merger, the growth is likely to be higher by around 3%.
However, elevated interest rates and global uncertainties could adversely impact credit growth. Further ebbing inflation could also reduce the working capital demand.
CARE Ratings also said the current account, savings account (CASA) deposit ratio—low cost deposits for the banks- stood at 43.1% as of 31 March 2023, as compared to 44.7% over a year ago.
"This decline has come about as banks focused on term deposit rates which drove higher growth for the same. Term deposits are expected to grow as banks have been further gradually increasing term deposit rates," CARE Ratings said. The credit rating agency estimates the deposit growth to be in the range of 10%-10.5% during FY23-24.
Further, as the credit offtake moderates compared to the last year but remains higher compared to the increasing deposit growth, the credit:deposit ratio is also slated to continue its expansion and reach around 77.5%-78% by FY24, CARE Ratings said.
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