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Slowdown in bank lending may bottom out this fiscal: Crisil

Bank loan may grow at about 6% this fiscal, while gross credit off take may rise 8-9% in FY21, Crisil said.

, ET Bureau|
Last Updated: Feb 26, 2020, 06.18 AM IST
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Crisil projected a modest 2-3 per cent rise in this segment, leading to a fall in its share in total bank credit to 48 per cent at the end of March 2021 from 51 per cent three summers back.
KOLKATA: Crisil Ratings stated a slowdown in bank lending may be bottoming out this fiscal, while gross credit off take may rise 8-9% year-on-year in fiscal 2021 backed by retail demand.

Bank loan may grow at about 6% this fiscal, the rating firm said.

"A gradual pick-up in economic activity, continuing demand for retail loans, and strong growth in lending by private sector banks should drive the uptick," it said in a note published on Tuesday.

Crisil's senior director Krishnan Sitaraman said that structural shifts such as favourable demographics, rising propensity to leverage for personal consumption, increase in availability of financing, and reasonable risk-adjusted returns for lenders, would continue to support retail lending. Its share of total bank credit is expected to rise around 400 bps to 28 per cent between March 2019 and March 2021.

The corporate lending (excluding lending to NBFCs) is expected to remain subdued in fiscal 2020 and thereafter, may witness a slight uptick. Crisil projected a modest 2-3 per cent rise in this segment, leading to a fall in its share in total bank credit to 48 per cent at the end of March 2021 from 51 per cent three summers back.

"Low capacity utilisation in the economy would keep private investments muted in the near to medium term, and the government’s mega-push to infrastructure will translate into credit growth only gradually," Crisil said.

As for this fiscal, it is expecting some growth momentum in the fourth quarter, after a subdued first three quarters. RBI’s move to exempt banks from cash reserve ratio (CRR) requirement for incremental credit to certain sectors for up to five years, may support lending. Incremental net domestic credit this fiscal up to December 2019 is just a fifth of what it was a year ago.

Lending to the retail segment and non-banking financial companies (NBFCs) showed good growth, while credit to corporates (ex-NBFC) and micro, small, and medium enterprises (MSME) declined.

"Retail credit should continue to grow at a healthy clip of about 16 per cent next year, supported by sustained demand for unsecured loans, muted business growth for non-banks as well as steady levels of pool purchases," the rating firm said.

Securitisation transactions through the direct assignment route have surged almost 40 per cent to Rs 59,000 crore in the first half of fiscal 2020, compared with Rs 42,700 crore a year ago.
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