Even as banks are likely to meet the Reserve Bank of India’s deposit and credit growth projections for the fiscal 2012-13, bankers and analysts see muted growth in FY14.
For FY13, the RBI’s growth projections for deposits and credit were 15 per cent and 16 per cent, respectively. Credit and deposit growth for FY14 is likely to be 16-17 per cent and 14-15 per cent, respectively.
Says A. Krishna Kumar, Managing Director and Group Executive, State Bank of India, “Traditionally, the first two quarters of a financial year mostly remain muted. Even then, I expect both advances and deposits to grow at 15-17 per cent in FY14.”
In FY13, banks shied away from aggressive lending due to concerns over asset quality. A rise in non-performing assets, delay in project implementation and inability to raise equity amid an overall slowdown in the economy impacted credit demand in the banking system.
“However, with a pick up in loans to retail and small and medium sector enterprises, the credit growth is likely to meet the RBI’s growth expectations. Similarly, a rise in savings deposits by year-end will also help match the growth projections,” said K. Subrahmanyam, Executive Director, Union Bank of India.
According to Pawan Agrawal, Senior Director, CRISIL Ratings, “Consistent with economic trends, credit growth will be at about 16 per cent, while growth in deposits will remain subdued at around 14 per cent in 2012-13, due to lower household savings rate and weaker surplus liquidity with corporates.”
Lower deposit growth
According to analysts, credit growth will outpace deposit growth.
“Deposit growth is still a concern and is likely to be about two percentage points lower than RBI’s estimates,” said Vishal Narnolia, Research Analyst, SMC Global Securities Ltd. In FY14, looking at the government’s estimate of 6.5 per cent GDP growth, the credit growth may be around 17 per cent. Deposit growth will still be lower at 15.5-16 per cent, he added.
Says Dinesh Shukla, Banking Analyst, Sharekhan, “Credit is likely to have grown by 15-15.5 per cent, mainly in the non-infrastructure sector in the fourth quarter, while deposit growth could have lagged at 12-12.5 per cent.
For FY14, given the GDP growth projections, credit growth will be at 16 per cent, while deposit growth will be at 14-15 per cent if inflation comes down.
However, Subrahmanyam expects credit to grow at 15-17 per cent, while deposits growth to be slow at about 14-15 per cent.
Credit demand
According to a CARE Ratings report, working capital demand will continue in the industrial sector even as project finance will be impacted in the first half of FY14 due to moderation in investment cycle.
Further, changes announced in the Budget coupled with softening of interest rates will have a favourable impact on housing in tier II and tier III cities, the report states. This will boost the real estate credit segment to some extent.
Bankers say, the credit off-take is still largely dependant on the retail segment along with agriculture, real estate and small and medium sector enterprises.