Credit growth expected to improve aided by govt’s push on public spending: Report

New Delhi: Bank credit offtake is expected to pick up following normalisation of economic activities aided by the government thrust on public expenditure in current fiscal year, a report said. According to the Care Edge report, the gross non-performing assets (GNPA) ratio hit a six-year low of 5.9 percent in FY22 but remained above the pre-asset quality review of 2015-16.

However, it said, India's NPA ratio is one of the highest among the comparable countries despite gradual decline.

Non-performing loans eased in advanced economies due to continued deleveraging, and institutional and government intervention, it said.

As the Indian economy has navigated the pandemic-induced shocks, it said, the bank credit growth by scheduled commercial banks (SCBs) improved post-August 2021 to reach 13.1 percent in early June 2022, a rate last recorded in March 2019.

Apart from retail, the major driver of this growth has been the wholesale credit, which reported double-digit growth after witnessing a significant slowdown last year, it said.

After a modest credit growth in recent years, it said, "the outlook for bank credit offtake is positive due to the economic expansion tracking nominal GDP growth, rise in government and private capital expenditure, rising commodity prices, implementation of the PLI scheme, the extension of ECLGS for MSME and retail credit push."

RBI in its latest Financial Stability Report said bad loans of banks are expected to further decline to 5.3 percent of total advances by March 2023 from a six-year low on the back of growth in credit and declining trend in the stock of NPAs.

The RBI further said if the macroeconomic environment worsens to a medium or severe stress scenario, the GNPA ratio may rise to 6.2 percent and 8.3 percent, respectively.

"At the bank group level too, the GNPA ratios may shrink by March 2023 in the baseline scenario," it said.

In the severe stress scenario, however, the GNPA ratios of public sector banks (PSBs) may increase from 7.6 percent in March 2022 to 10.5 percent a year later. The GNPA ratios would go up from 3.7 percent to 5.7 percent for private sector banks and 2.8 percent to 4 percent for foreign banks over the same period.

(With PTI inputs)

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