As per the rating agency CARE, Indian economy may grow at 6 percent in FY14 and the expansion in economic growth over the 5 percent growth expected in the current fiscal will lead to increase in bank credits by 18-19 percent from the current 16 percent. Moreover, the deposits may increase by 17-18 percent in next fiscal over the current fiscal.
CARE, a leading credit rating company headquartered in Mumbai, has said that demands for loans would mainly come from the working capital requirements of companies, while, the project finance would continue to stay impacted till the end of September due to a moderation in the investment cycle.
Regarding the net interest margins of banks, it said that banks cutting interest rates may see a 0.05 to 0.10 percent decline in the net interest margins as the cost of deposits are not expected to soften due to the high credit deposit ratios and expected credit growths.
On asset quality front, the rating agency said that the prevailing slowdown in the economy will increase the non performing assets of banks. Thereby, CARE expects that the gross non-performing assets ratio of lenders to go up by 3.8- 3.9 percent of advances, while restructured advances will go up by 5.7- 5.8 percent.
