Rating agency Crisil on Monday said that the bank credit growth will likely nosedive to 0-1% in FY21, due to the economic activity being impacted by COVID.
“This is in sharp contrast to Crisil’s earlier expectation of 8-9% credit growth before the pandemic struck. In other words, the impact of the pandemic on credit growth will be a whopping 800 basis points,” the credit rating agency said.
The gross bank credit growth was at 3% in FY17, 9% in FY18, 11% in FY19, and it is estimated at 6% in FY20.
Krishnan Sitaraman, the senior director, Crisil, said, “The crisis is unprecedented and so will its economic fallout be — such as lower Capex demand as well as lower discretionary spends, to name some — which will slow down credit offtake.”
He further said the corporate loan portfolio, which constitutes almost half of total credit, is expected to de-grow this fiscal and be the worst-hit. “The lockdown has led to significant disruption in operations with limited capacity utilization across sectors,” said Sitaraman.
Retail lending, which is about a fourth of overall credit and was holding the fort so far, is also expected to slide amid job losses and salary cuts that will lead to reduced expenditure on discretionary items, Crisil said. However, the purchase of new homes and vehicles are expected to be delayed, impacting demand for financing.
The credit growth has been declining as per the latest RBI data. The non-food credit shrank to Rs 101.4 lakh crore as on May 22 from Rs 103.2 lakh crore as on March 27.
Rajnish Kumar, chairman, State Bank of India, also highlighted weak loan growth expectations in the current fiscal, “We had budgeted for 12% growth in the loan, but that seems unlikely in the current scenario. It should be somewhere between 5% to 12%..so the midpoint will 7-8%. Therefore it should grow by 7-8 %.” Kumar said.