Ratings agency ICRA has revised upwards its projection of bank credit growth in FY24 to 14.9-15.3 per cent, estimated at an incremental growth of ₹20.4-20.9 lakh crore, from the earlier projection of 12.8-13 per cent equating to a growth of ₹17.5-17.8 lakh crore.

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“This will be the highest ever incremental bank credit growth and would surpass the previous high of ₹18.2 lakh crore (YoY growth of 15.4 per cent) in FY23,” ICRA said, adding that corporate bond issuances are also expected to touch a record high of ₹9.6-9.9 lakh crore in FY24, higher than ₹8.7 lakh crore in FY23.

Bond issuances are seen at ₹9.6-9.9 lakh crore in FY24 and ₹10.0-10.5 lakh crore in FY25 against ₹8.7 lakh crore in FY23. Corporate bond outstanding, estimated at ₹44.7 lakh crore as of December 2023, is seen growing 5-7 per cent on year to ₹45.2-45.5 lakh crore by March 2024 and ₹47.7-48.5 lakh crore by March 2025.

However, challenges in deposit mobilisation could temper bank credit expansion to 11.7-12.6 per cent or ₹19-20.5 lakh crore in FY25, it said.

Credit-deposit

Incremental bank credit growth touched nearly ₹16.9 lakh crore in the nine-month period ended December 2023, far outpacing the ₹14.1 lakh crore expansion in the previous year. The rise has been driven by 33 per cent growth in retail and 23 per cent in the NBFC segment as of November 18, 2023.

For Q3 FY24, incremental bank credit growth was ₹6.1 lakh crore compared with ₹10.8 lakh crore in H1 FY24. However, growth in December 2023 was lower at ₹1.3 lakh crore against ₹2.0 lakh crore a year ago.

“The relative deceleration in bank credit-expansion seen during December 2023, reflects the regulatory measures on increased risk-weights on loans extended to consumer credit and NBFCs, apart from the tight liquidity conditions in the banking sector. Looking ahead, weaker export demand in certain sectors, softer commodity prices, and challenges in deposit mobilisation could temper bank credit growth in FY25,” said Anil Gupta, Senior Vice-President, ICRA.

This bank credit growth will be accompanied by record incremental deposit mobilisation in FY24, with the highest ever build-up at ₹21.7-22.3 lakh crore, of which ₹19.2 lakh crore has been mobilised in 9M FY24 aided by record accretion of ₹11.2 lakh crore in Q1 FY24 following the withdrawal of ₹2,000 currency notes. In FY23, deposit mobilisation was ₹15.8 lakh crore.

“The incremental ask for banks to keep ramping up deposits to bridge the gap with credit growth would remain a challenge, despite the anticipated relative moderation in credit growth in FY25. Amid tight liquidity conditions, banks could increase dependence on non-deposit resources, including debt capital market instruments and refinance from All-India Financial Institutions (AIFIs) in the interim,” ICRA said.

Deposit mobilisation is expected to moderate to ₹19.4-20 lakh crore in FY25, registering a growth of 9.5-9.8 per cent on year as against 12-12.3 per cent estimated for FY24. Incremental credit-deposit ratio is expected to remain high at 95-100 per cent n FY24-FY25, keeping liquidity conditions tight through FY25 as well.

NBFC growth

AUM growth for NBFCs has also been revised to 14-16 per cent for FY24, against the earlier estimate of 13-15 per cent. This is expected to moderate to 13-15 per cent in FY25.

“Within NBFCs, retail AUM of NBFCs (excluding HFCs) is expected to witness a growth of 21-23 per cent for FY24 and moderate to 17-19 per cent in FY25. The NBFC-HFCs and NBFC-infra sectors are expected to witness an AUM growth of 12-14 per cent in FY24 and 10-12 per cent in FY25,” said Senior Vice-President A M Karthik.