“The credit-to-GDP gap narrowed, reflecting the improved credit demand in the economy in the face of rising capacity utilisation in the manufacturing sector,” the researchers stated.
The credit growth in scheduled commercial banks has been accelerating since early 2022, with credit rising faster than the growth in aggregate deposits.
“In the coming months, we expect credit demand to remain robust due to the festive season,” said SBI economists.
SBI forecasts GDP growth to average 6.7 per cent in FY24, higher than RBI’s estimate of 6.5 per cent and other international agency forecasts of 6.3 per cent.
The researchers indicated to the results of five banks for Q2FY24 to point to stronger performance.While non-performing assets have been declining, the net profits of these five banks show a 50 per cent growth over the year and a 25 per cent rise over the last quarter.The economists pointed to a broader flow of credit, with both secured and unsecured loans rising, as a sign of improving economic momentum.
“As banking sector growth leads to GDP growth, nominal GDP also increased 1.4 times higher during FY14-23, compared with FY51-14,” they noted.
The incremental growth in assets and liabilities of all scheduled commercial banks between FY14-23 was 31 per cent higher than between FY51 and FY14.
The report also dismissed concerns around unsecured credit, pointing out that the decline in credit card outstanding growth indicates that there is no need to worry about unsecured loans for now.
Credit card outstanding rose 13 per cent in August, compared with the 24 per cent growth witnessed at the start of the year.
Unsecured retail loans account for just 10 per cent of the total loan portfolio, indicating contained risk.
It further pointed out that even the new customers are showing adherence to repayment discipline.
“People getting inducted into formal credit mechanism for the first time, either through institutional lenders or a credit card company) are showing little divergence in credit behaviour post onboarding, alleviating concerns from select quarters.”
