6 days ago
India Ratings Lifts FY27 Bank Credit Growth Forecast To 15%
India Ratings expects Indian banks to lend more money in FY27.
It raised its forecast for loan growth from 13% to 15%.
However, banks may earn slightly less because they will need to set aside more money for possible loan losses.
This is part of a new Expected Credit Loss system.
Public-sector banks may feel more pressure because they have smaller cushions for these provisions.
Bank deposits have not grown as quickly as loans, which has pushed up the loan-deposit ratio.
Deposits from overseas Indians may help banks attract more money, but the improvement could be temporary.
The report also expects trade-receivables financing through TReDS to grow by at least 10-15% over the next few years.
India Ratings raised its FY27 bank credit growth forecast to 15% from 13%, below the 19.3% year-on-year growth recorded on July 31.
Credit costs are projected to increase to 0.74% in FY27 from 0.65% in FY26 as banks transition to Expected Credit Loss provisioning.
System-wide return on assets is expected to decline by 0.06 percentage points to 1.31% in FY27, with public-sector banks facing greater pressure.
Deposit growth is forecast at nearly 13.6% in FY27, while the loan-deposit ratio reached 84.8% in the first quarter compared with 71.7% in FY22.
The Trade Receivables Electronic Discounting System could grow by at least 10-15% over the next two to three years, according to India Ratings.
- Who
- India Ratings, Indian banks, non-banking finance companies and the Trade Receivables Electronic Discounting System.
- What
- India Ratings revised its FY27 bank credit growth forecast upward to 15% and assessed profitability, deposits, NBFCs and TReDS prospects.
- Where
- India; the report was datelined Mumbai.
- When
- The assessment was reported on August 27 and covers FY27.
- Why
- Expected stronger corporate working-capital lending, diaspora deposits and more attractive bank borrowing for NBFCs supported the higher credit-growth forecast, while Expected Credit Loss provisioning is expected to raise costs.
Key facts
- FY27 credit growth forecast
- 15%, revised up from 13%
- Current credit growth
- 19.3% year-on-year as of July 31
- Projected FY27 credit costs
- 0.74%, compared with 0.65% in FY26
- Projected FY27 return on assets
- 1.31%, down 0.06 percentage points year-on-year
- FY27 deposit growth forecast
- Nearly 13.6%, including the expected impact of FCNR(B) deposits
- Loan-deposit ratio
- 84.8% in the first quarter of FY27, compared with 71.7% in FY22
- TReDS growth outlook
- At least 10-15% over the next two to three years
Quotes
Jatin Nanaware
Senior director and head of structured finance discussing guarantee schemes and TReDS receivables
“When the guarantee schemes come, that will give some confidence to the buyer in that market to take those receivables also in their book, actually.”
freepressjournal.in
Sources
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