Ind-Ra's stable outlook on public sectors banks took into account continued government support through large capital infusions, leading to a significant boost in capital buffers over the minimum regulatory requirements.
Credit growth slowed further to 5.6% in the fiscal ended March 2021 compared to 6.1% reported in fiscal 2020, RBI data shows. This is the slowest pace of growth since the data available on the RBI website as far as 1965.
Bank credit growth on a year-on-year basis stood at 5.4 per cent in September quarter of the current fiscal year compared to 5.7 per cent growth in the previous quarter, RBI data showed.
Besides, muted private investment impacting the corporate loan growth will be another challenge that banks will have to face in the coming months. Despite ample liquidity in the system, demand from the corporate sector is very low and bankers hope that faster than anticipated recovery could bring in the animal spirit as far as India Inc is concerned.
Non-food bank credit growth decelerated to 5.6 per cent on a year-on-year (y-o-y) basis, in October 2020 from 8.3 per cent in October 2019.
Fresh gross slippages are estimated to be at 5-5.5 percent of standard advances during 2020-21, which will increase the banks' credit provision and impact their earnings, rating agency ICRA said in a report.
"The most critical challenge today for banks not just in India but also elsewhere is slowing credit offtake. It affects the profitability of banks," Das said at the Mint annual banking conclave here.
The global investors chasing yield in a negative rate environment in developed markets.
Indian banks had outstanding credit of Rs 99.47 lakh crore at the end of 2019, compared with Rs 92.87 lakh crore at the beginning of the year.
The positive outlook is buttressed by strong drivers emanating from services sector and better demand conditions arising out of poll spend, with the general elections slated next year, according to the chamber.
Low credit penetration, push towards formalisation of economy, and a gradual shift in the focus of banks and NBFCs towards this segment provide strong tailwinds to the business, the report reveals.
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