Indian Banks Set to Achieve 12.5% Credit Growth in 2024-25: HSBC
Indian banks are poised for a credit growth of 12.5 per cent in the upcoming financial year 2025, based on a recent report by HSBC Securities and Capital Markets (India) Private Limited released on Friday. The report, however, sounded a note of caution regarding a potential slowdown in GDP growth, which could pose risks and limit credit expansion in 2024-25.
Challenges Ahead
The report outlined various challenges, emphasizing that factors such as tight liquidity conditions, sluggish growth in deposits, a deceleration in GDP, and a high loan-to-deposit ratio are significant risks to credit growth in the banking sector. Despite these concerns, the retail loan segment showed encouraging signs in November 2024, driven by robust demand for unsecured personal loans, steady growth in home and gold loans, as well as some recovery in credit extended to non-banking financial companies (NBFCs).
Positive Momentum in Retail Loans
Non-food credit saw a year-on-year growth of 12.2 per cent in November 2024, a slight increase from the 12 per cent growth in October. Month-on-month growth also improved to 1.3 per cent from 0.7 per cent. Retail loans experienced a 13.3 per cent year-on-year increase and a 1.5 per cent month-on-month growth, while loans to micro, small, and medium enterprises (MSMEs) rose by 13.8 per cent year-on-year and 0.7 per cent month-on-month. Corporate loans also witnessed a rise of 9.6 per cent year-on-year and 1.5 per cent month-on-month.
Broad-Based Growth in Retail Loan Segments
The report highlighted broad-based growth across most retail loan segments. Home loans expanded by 12.2 per cent year-on-year and 1.3 per cent month-on-month in November, a significant improvement from the 0.9 per cent growth in October. The demand for residential housing is expected to sustain stability in this segment. Gold loans saw notable growth, increasing by 6.7 per cent month-on-month and accounting for 12 per cent of incremental retail loans in November. The report indicated that a slowdown in microfinance loans has driven demand for gold loans as an alternative borrowing option.
Looking Ahead
While vehicle loans experienced a decline of 1.8 per cent month-on-month, reflecting subdued vehicle sales, credit card receivables surged by 18.1 per cent year-on-year in November, up from 16.9 per cent in October. However, the growth in receivables outpaced the growth in spending through credit cards.
In conclusion, the banking sector in India is gearing up for a year of credit growth in 2024-25, despite potential challenges on the horizon. Stay tuned for further updates on this evolving financial landscape.