Indian banks’ credit growth and asset quality will remain strong in the current financial year, indicating strong economic growth. However, ratings agency S&P Global Ratings said banks may be forced to slow their loan growth as deposits are not growing at the same pace.
Nikita Anand, director, SSEA, S&P Global Ratings, Asia-Pacific, said in its second-quarter banking update that if deposit growth, particularly retail deposits, remains subdued in the current fiscal, the agency expects strong credit growth to decline to 16 percent to 14 percent. Anand said the loan-to-deposit ratio has declined in every bank, with loan growth being two-three percent higher than deposit growth.
What did Nikita Anand say?
“We expect banks to reduce their credit growth in the current fiscal and bring it in line with deposit growth,” Nikita Anand said at a recent seminar at S&P Global Ratings. If banks don’t, they will have to pay more to get bulk funds, which will affect profitability.”
Credit growth has generally been highest among private sector banks. It has seen an increase of about 17-18 percent. Public sector banks (PSBs), on the other hand, have seen credit growth in the range of 12-14 percent.