Credit rating agencies expect banks’ credit growth to slow a mite to about 14-15 per cent in FY25 against the estimated 16 per cent in FY24 amid elevated lending rates and global headwinds.

Crisil Ratings assessed that credit growth for banks is expected to remain healthy in fiscal 2025, but grow a tad slower at 14 per cent, compared with 16 per cent estimated for fiscal 2024, given the likely moderation in economic growth.

“A key monitorable here would be the ability to mobilise cost-effective deposits. While rising deposit rates could impact net interest margins, asset quality metrics are likely to be benign with gross non-performing assets continuing to decline,” the agency said.

CareEdge Ratings has estimated FY25 credit growth to be in the range of 14 per cent-14.5 per cent.

However, elevated interest rates and global uncertainties could adversely impact credit growth, it cautioned. Further ebbing inflation could also reduce the working capital demand.

Positive outlook

The outlook for bank credit offtake continued to be positive (in FY24) due to the economic expansion, rise in capital expenditure, growth in retail credit and the anticipated expansion in capex spending especially by the private sector, the agency said.

“The growth is anticipated to be broad-based across the segments. The personal loan segment is expected to continue doing well compared with the industry and service segments. The medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions.

“This growth would be coming off a high base in FY24, which would impinge marginally on the growth rate. Further, the HDFC merger effect is anticipated to dissipate by the end of Q1 FY25 and the headline numbers would show the removal of the base effect,” per CareEdge Ratings assessment.

Hence, based on GDP forecasts, sectoral credit growth expectations and management expectations, CareEdge estimates the credit growth to be in the range of 14 per cent-14.5 per cent during FY25.

India Ratings and Research expects a healthy banking credit growth at 15.4 per cent year-on-year in FY25, with revival in private capex benefitting the growth of the corporate segment.