Credit growth likely to be below 8% in FY18: ASSOCHAM

29 Dec 2017 Evaluate

The industry chamber Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its latest report has stated that credit growth is likely to be below 8 percent during the financial year 2018, despite government's thrust on loan expansion. As per the report, the reason behind it is slowdown in Indian economy together with high stress level in the banking sector. However, it pointed out that credit growth would be slightly better than the five decade low growth of 5.1 percent in non-food credit recorded in the FY17 as compared to 10.7 percent a year ago.

The report also expects that credit growth this year would be largely driven by the retail segment and farm loan. It also noted that expansion could also be contributed by some segments of the industry related to infrastructure if they pick up in the second half of the current fiscal. Adding further, it said that there could be some uptick in lending towards the micro, small and medium enterprises (MSME) sector with the government asking banks to increase their exposure to the sector as they are one of the largest employers. It also explained that one of the objectives of the government's Rs 2.11 lakh crore recapitalisation plan for public sector banks, is to enable banks to enhance lending to industry especially MSME by strengthening balance sheets of NPA-ridden public sector banks (PSBs). It added that Non-performing assets of PSBs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.78 lakh crore in March 2015.

ASSOCHAM has further said that notably, the corporate sector is not getting loans from banks as lenders have become risk averse due to mounting NPAs. It also said that to make matter worse, companies with good ratings are tapping market as rates are cheaper in the bond markets. It observed that only segments which are witnessing healthy growth are personal and agriculture credit with jump of over 10 percent. Besides, it finds out that this situation is going to continue more or less the same for the rest of the financial year limiting credit growth between 8 and 9 percent for the entire fiscal even after taking into account acceleration during second half of the financial year referred as busy credit season, and proposed strengthening of balance sheets of PSBs.

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