Domestic brokerage Kotak Institutional Equities today said the drying up of demand for credit will impact banks' asset book expansion over the next couple of years. “Slowing economic growth on the back of a sharp rise in interest rates, slowdown in withdrawals on existing projects pending clearance of regulatory issues, and the RBI clampdown on increasing exposure to SEBs (state electricity boards) seem to have impacted loan growth,” it said in a report.
The report estimates that loan growth, which has been hovering around 20 per cent in the recent years, to come down to 15-16 per cent till FY14.
The loan growth of state-run banks, which was estimated to grow at 22 per cent per annum for the four fiscals till FY12, would plummet to 15 per cent per annum for FY12 to FY14.
In contrast, Kotak expects the private-sector lenders' loan growth to be 19 per cent during this period, in the wake of the sharp rise shown by the largest private sector lender, ICICI Bank, in the recent past.
With an eye on the inflation number, the RBI increased its key rates a record 13 times during the 19-month period till last October, which is being cited as one of the principle reasons for the slowdown in growth.
As a result, the government, which went into the fiscal targeting a 9.25 per cent GDP growth, is likely to see much slower growth, the report said.