Credit Drawdown Continues to Rise, Sees High Growth for Nearly 9 Years: CareEdge
Mumbai, Sep 26 (IANS) Credit draw recorded robust growth of 16.2% year-on-year in the fortnight ending September 9, nearly the highest growth in the past nine years thanks to strong retail sales and improving wholesale credit. , according to the CareEdge report.
However, further rate hikes due to high inflation and currency depreciation could negatively impact credit growth.
The increase in credit demand is due to improving economic activities, credit expansion (16.2%), slower deposit growth (9.5%), early season festivals, cash shortages and high inflation which should boost deposit rates.
With the festival season approaching, credit growth is expected to remain elevated. After modest credit growth in recent years, the outlook for bank credit utilization is positive due to economic expansion following nominal GDP growth, strong demand for small loans (tickets), increased public and private capital expenditure, raw material prices, increased demand for working capital, increased capacity utilization rate, implementation of PLI and ECLGS scheme for MSMEs.
The medium-term outlook looks promising with less corporate stress and a large cushion of provisions. However, inflation remains a major risk. Even though RBI managed domestic inflation to some extent, global inflation remained high
despite warmongering policies. This can lead to demand issues globally, leading to second-order effects in India.
As a result, CareEdge estimates credit growth will be between 12 and 13 percent in FY23, but rate hikes could negatively impact credit growth.