FICCI-IBA Survey: Credit growth has improved, demonstrating solid demand conditions
In the fiscal year that ended in March 2023 and the first quarter of the current fiscal year, respectively, India's economy grew by 7.2% and 7.8%.
Read more: Gross direct tax receipts for the fiscal year 2023–24 climbed 17.5% to 11.07 lakh crore
According to the FICCI-IBA survey's seventeenth round, credit growth also increased, indicating both excellent demand conditions in the Indian economy and banks' increased willingness to lend to retail borrowers.
The results of the survey demonstrate that the demand for long-term loans has been rising for industries like infrastructure, textiles, chemicals, food processing, and metals. In the previous six months, long-term loan disbursements have also increased in the iron and steel industries. Credit flow to infrastructure is increasing, with 67% of respondents reporting an increase in long-term loans, compared to 57% in the preceding round.
Non-food industry loan growth to be over 12%
According to the study, the outlook for non-food industry credit growth over the next six months is positive. 42% of the participating banks anticipate non-food industry loan growth to be over 12% (up from 36% in the previous round).
There has been a shift towards term deposits as a result of the rising interest rates. In the most recent round of the study, more than half of the responding banks (57%) reported a decline in the proportion of CASA deposits to total deposits. According to the respondent banks, term deposits have accelerated.
According to the study, the outlook for non-food industry credit growth over the next six months is positive. 42% of the participating banks anticipate non-food industry loan growth to be over 12% (up from 36% in the previous round).
According to the poll, 83% of the banks who responded said that the lending conditions for large businesses had stayed the same, which was reported by 54% of respondents. In the most recent round of surveys, 29% of participating banks indicated that credit requirements had been loosened, indicating ongoing financing improvement. In the current survey round, 68% of respondents for SMEs also stated that there had been no change in loan conditions.
Survey shows that NPA levels have decreased
With regard to asset quality, 75% of the responding banks stated that their NPA levels have decreased during the previous six months, down from 90% of banks in the previous round. While 80% of participating private sector banks reported a decrease in NPA levels, 90% of public sector banks reported a decline.
The majority of the participating bankers named industries like infrastructure, textiles, and food processing as having persistently high NPA rates. Metals iron and steel, and engineering items are among the other high NPA sectors.
In the most recent round of the poll, respondent banks were more upbeat about the prospects for asset quality, cushioned by policy and regulatory assistance, and this was reflected in the survey results. In the most recent round, 54% of the responding institutions predicted that gross non-performing assets would range between 3 and 4% during the following six months.
Bankers that responded to the survey cited a strong domestic economy, a pick-up in loan growth supported by government capital spending, a strong recovery mechanism, high provisioning, and significant write-offs as the main drivers of their expectation that asset quality would continue to improve over the following six months.
Apparel, MSME, aviation, agriculture, and retail trade, may continue to demonstrate non-performing assets during the following six months.
Banks could enhance funding for startups
Additionally, banks were asked to share their level of readiness for startup finance. The majority of banks claimed to have adequate capital, and some of them even created start-up verticals to meet this need. Additional steps that banks could take to enhance their funding for the startup ecosystem were also recommended by banks.
These included streamlined loan application and approval procedures for start-ups, which could be accomplished in partnership with fintech, the creation of specialized divisions to address the unique financial needs of start-ups, the exploration of alternative forms of collateral like IPR, equity stakes, etc., collaboration with incubators, accelerators, and VCs, and the organization of workshops on financial education tailored to start-ups. Additionally, it was recommended that RBI should take into account opening a second liquidity window where banks might obtain funding for subsequent loans to start-ups.
OTT India updates you with the latest news, The Country’s no.1 digital news platform OTT India. Keeps you updated with national, and international news from all around the world. For more such updates, download the OTT India app on your Android and IOS device
.