Credit demand losing sheen, may slip by 200 bps to 14% in FY25

MUMBAI: Bank credit growth is likely to decelerate by 200 bps to 14 percent on year this fiscal primarily because of the economy losing its sheen this fiscal, partly due to a high base, says a report.

Strong economic activity and retail credit demand drove loan growth last fiscal to a robust 16 percent. This fiscal, however, growth will be tempered by the high base effect, a revision in risk weights and a slower economy.

Accordingly, overall credit demand is likely to decelerate by 200 bps to around 14 percent this fiscal, Crisil Ratings said in a report, which however quickly added that the fundamental drivers of credit demand are broadly intact and a revival in private capex, from the second half, can provide a tailwind.

On the other hand, the pace of deposit growth can keep a check on credit growth, even though the differential between the two has come down over the past year.

Within the overall credit growth, the largest segment, corporate credit, which constitutes 45 percent of bank credit, is likely to grow steady at 13 percent, while retail, which is 28 percent of bank credit and thus the second-largest segment, is expected to grow the fastest at 16 percent, according to Ajit Velonie of the agency.