Bank credit likely to grow by 9-10% in FY22: CRISIL

SUBRATA PANDA Mumbai, 1 March Bank credit is expected to grow at 9-10 per cent in 2021-22 fiscal year as the economy recovers gradually from the slowdown, backed by the government’s budgetary support and measures of the Reserve Bank of India, said rating agency CRISIL in its report.

Despite bank credit contracting by 0.8 per cent in the first half of the current fiscal year (H1FY21) because of the slowdown, the rating agency expects it to rise by 4-5 per cent at the end of FY21, which is a departure from its June 2020 estimate. It had earlier forecast a bank credit growth of 0-1 per cent in FY21. The change in the forecast is because of a quick economic recovery following the gradual opening up of the economy. It was further aided by the pent-up demand as well as the festive demand post the lockdown.

While growth in credit to corporates is expected to shrink in FY21 as they have deferred their capital expenditure plans, however, in FY22, corporate credit growth is likely to be in the range of 5-6 per cent, aided by the central government’s infrastructure push and a likely revival in demand, according to the rating agency.

Similarly, retail loans, which have driven the bank credit growth so far, are expected to slow down to 9-10 per cent in FY21 before returning to the mid-teens growth of the past couple of years. Credit to micro, small, and medium enterprises (MSMES) is expected to slow down marginally in the next fiscal year to 8-9 per cent, given the benefits of emergency credit line guarantee scheme (ECLGS) may not be available. In FY21, credit to MSMES is expected to grow by 9-10 per cent.

And the credit to the agriculture sector is expected to grow in the 6-7 per cent range in this fiscal year as well as in FY22, but a lot will depend on the monsoon.

“Overall, sharp economic recovery, along with pick-up in private investment and capex demand, drives our expectation of buoyant credit growth in the next fiscal year. A subnormal monsoon and another surge in cases leading to localised or partial lockdowns pose downside risks,” the report said.