'Bank credit growth in India expected at 14-14.5% in FY25'

New Delhi, Mar 29: CareEdge Ratings estimates bank credit growth in India to be in the range of 14-14.5 per cent in financial year 2024-25. In current financial year 2023-24, credit offtake is anticipated to close with a growth of around 16 per cent excluding the HDFC merger.

According to the rating agency, the effect of the HDFC merger would dissipate by the end of the first quarter of 2024-25. However, elevated interest rates and global uncertainties could adversely impact credit growth.

India has a relatively lower level of bank credit to GDP ratio when compared to other countries and to improve the same, access to credit and the cost of credit need to be addressed, the rating agency asserted.

Credit in India has continued to outpace deposit growth by a significant margin significantly. Apart from personal loans (driven by improved digitalisation), the major driver of this growth has been the NBFC segment.

"Personal loans and NBFCs have been the main growth drivers for the Indian banking sector, as corporate lending has been muted due to NPAs and deleveraging," it said.

On macroeconomy, CareEdge Ratings expects India's GDP to growth at 7.6 per cent in 2023-24 ending on March 31, and around 7 per cent in the next financial year 2024-25.

According to the rating agency, the economic growth in the current financial year was supported by a strong growth in investment demand led by public capital expenditure.

In the interim Budget tabled on February 1, the government proposed to increase capital expenditure outlay by 11.1 per cent to Rs 11.11 lakh crore in 2024-25. A capital expenditure, or capex, is used to set up long-term physical or fixed assets.

Last year, which was the last full Budget under the Prime Minister Narendra Modi-led government's second term, the government proposed to increase capital expenditure outlay by 33 per cent to Rs 10 lakh crore in 2023-24, which was estimated to be 3.3 per cent of the GDP.