India’s scheduled industrial banks noticed strong progress final monetary 12 months. Credit score progress was sturdy, non-performing property (NPA) had been considerably decrease and income had been excessive. The development is more likely to proceed this 12 months, with NPAs anticipated to say no additional and credit score progress more likely to stay sturdy, though some moderation in credit score enlargement and margins is seen after a file 2022-23 monetary 12 months.
Credit score rankings company ICRA sees credit score progress of 12.1 per cent to 13.2 per cent, with incremental credit score enlargement at Rs 16.5 lakh crore to Rs 18 lakh crore within the present monetary 12 months ending March 2024.
“Credit score progress stays strong regardless of some moderation. Even on the anticipated tempo of progress for FY2024, incremental credit score enlargement could be the second highest ever at Rs 16.5-18.0 lakh crore, subsequent solely to the file degree of Rs 18.2 lakh crore final 12 months,” stated Anil Gupta, senior vice-president and co-group head at ICRA.
A serious driver of credit score progress in current occasions has been the retail phase, with demand for secured and unsecured loans seeing sturdy traction. From 18 per cent in March 2013, the share of retail in total financial institution credit score rose to 32 per cent as on March 31, 2023, ICRA famous. There’s a want to observe asset high quality on this phase, say analysts.
“Even because the retail phase has carried out properly, the fabric weakening of macro-economic situations may exert strain on the debt-servicing skills of debtors and we stay watchful of its affect on the asset high quality of lenders,” stated Gupta.
Even the Reserve Financial institution of India had flagged issues round rising gross NPAs in bank card phase earlier this 12 months.
Whereas the retail phase could have to be watched out for, total NPAs of banks have been falling additional this 12 months. ICRA sees gross NPAs of banks (13 state-owned banks together with IDBI Financial institution and 18 personal banks) at 3.0 per cent this 12 months, decrease than the three.7 per cent final 12 months. In absolute phrases, gross NPAs this 12 months are seen at Rs 4.6 lakh crore, versus Rs 5.3 lakh crore final 12 months.
Internet NPAs this 12 months are seen at 0.8 per cent, in contrast with 0.9 per cent in 2022-23.
The web curiosity margins (NIMs) of banks, nonetheless, are seen contracting by 20-25 foundation factors as rates of interest have risen and deposits get re-priced at increased charges. ICRA famous that credit score prices, that are estimated to stay at 1 per cent of advances within the present monetary 12 months, in-line with 2022-23, ought to enable banks to comfortably stand up to the margin compression.
