Diminishing level of inflation, especially on the wholesale side which tends to lower working capital needs, and an expected moderation in GDP growth to 5.3 per cent in FY24 were cited as the primary reasons for the lower bank credit growth expectation by Nomura.
“… we expect credit growth to moderate to 10 per cent in FY24 from 15 per cent in FY23,” reported PTI, citing analysts at the brokerage as saying in a report, adding that the base effect will also be partly responsible for driving the number down.
They also said the rate hikes of more than 2.50 per cent by RBI in the current tightening cycle will impact credit growth through a lagged impact on borrowings, and already, there are some signs of a dent on the home loan front.
The credit growth momentum is already moderating, the brokerage said, pointing out that the number has come down to 15.4 per cent in March as compared to 16 per cent in February and 16.7 per cent in January.
“A further moderation is likely. Underlying credit momentum, as measured by the 3-month saar (seasonally adjusted annualised rate) has declined even more sharply to 9.3 per cent in March from over 20 per cent at end-2022,” the report stated.
It can be noted that all lenders have been having a great run with high credit growth and lowest stress on the books in over a decade at present.
(With inputs from PTI)