According to Crisil, the banking system’s credit development would nearly double to 10% in 2021-22 due to the economic turnaround and policy initiatives.
According to the department, the sum of total non-performing assets (NPAs) will increase to 10.5-11 percent by the end of 2021-22, according to the department, which is around a percentage point lower than expected.
According to the study, GDP growth is estimated to be 11% in the newly started fiscal year, following a 7.7% decline in the pandemic-affected fiscal years of 2020-21.
The increasing COVID-19 infections pose a threat to economic growth. Still, they are unlikely to result in widespread lockdowns; according to the CDC, a more aggressive vaccine campaign would also benefit.
According to the department, bank credit expansion will expand by 4-5 percentage points to 9-10 percent in 2021-22.
According to the study, retail loans are expected to rise in the mid-teens, while corporate loans, which de-grew during 2020-21, are expected to grow by 5-6 percent.
According to the department, corporate loans, which account for approximately half of all bank credit, were subdued in 2020-21 due to low capital expenditure (CAPEX) and a decline in demand, which decreased the need for working capital.
According to the report, the economy is expected to improve due to the government’s and RBI’s stimulus initiatives and the Budget’s focus on infrastructure.
According to the study, the credit guarantee loans program was a key factor boosting total credit growth for the banking sector in 2020-21. According to the rating firm, bank credit recovered in a “V-shaped” pattern in the second half of the fiscal year.
However, the department argues that if legislative measures such as a freeze, one-time debt consolidation, and deferring bankruptcy proceedings had not been enforced, NPAs would have risen by one percentage point.
According to the department, total assets under management (AUM) of non-banks are expected to rise at a slower rate of 5% in 2021-22 and have yet to reach pre-pandemic thresholds. According to the study, the most significant impediment to the non-banking financial company (NBFC) sector would be financing sources to cover liabilities. Targeted long-term repo operations, for example, have aided the market, according to the report.
As of March 2021, the stressed assets of NBFCs have risen to Rs 1.8 lakh crore, with real estate financing, unsecured loans, and small business finance is the most stressed, according to the study.
According to the study, the setbacks would have the most negligible impact on NBFCs that specialize in gold loans and mortgages.