Industry credit expected to grow over 12%: FICCI-IBA survey

A survey conducted by industry body FICCI and Indian Banks' Association (IBA) suggested that the outlook for non-food industry credit growth over the next six months is optimistic with 62 per cent of the participating banks expecting non-food industry credit growth to be above 12 per cent.

The nineteenth round of the FICCI-IBA survey was carried out for the period January to June 2024. A total of 22 banks including public sector, private sector and foreign banks participated in the survey. These banks together represent about 67 per cent of the banking industry, as classified by asset size.

The Indian economy and the banking sector remain robust and resilient, the survey found.

With improved balance sheets, banks are supporting economic activity through sustained credit expansion. However, credit growth is outpacing deposit growth, which could lead to liquidity challenges for the banking system.

Raising deposits to keep pace with the loan growth and keeping the credit cost low remains on the top of banks' agenda, the survey said.
The survey findings show that long-term credit demand has seen continued growth for sectors such as Infrastructure, metals, iron and steel, engineering.

Infrastructure is witnessing an increase in credit flow with 77 per cent of the respondents indicating an increase in long-term loans. This could be attributable to the government's capital expenditure push for the infrastructure sector.

More than two-thirds of respondent banks (67 per cent) reported a decrease in the share of CASA deposits in total deposits in the current round of survey.

Term deposits have picked up pace as reported by the respondent banks due to higher/attractive rates. 80 per cent of the participating Public Sector Banks reported a decrease in share of CASA deposits during the first half of 2024 while over half the private sector bank respondents reported a decrease in CASA deposits.

In continuation with the trend witnessed in the previous round, a large majority (71 per cent) of the respondent banks reported a decrease in the NPA levels in the last six months. A significant 90 per cent of responding PSBs have cited a reduction in NPA levels while amongst participating Private sector banks, 67 per cent have cited a decrease.

All the respondent Foreign banks cited no change in NPA levels over the last six months. Amongst the sectors that continue to show a high level of NPAs, most of the participating bankers identified sectors such as Textiles, Infrastructure and Food Processing.

Over half of the respondent banks in the current round believe that Gross NPAs would be in the range of 2.5 - 3 per cent over the next six months. 19 per cent respondents are of the view that NPA levels would be in the range of 2- 2.5 per cent.

An overwhelming majority (70 per cent) of Public Sector respondents expect gross NPAs to be in the range of 2.5-3 per cent. 44 per cent of private bank respondents expect NPAs to be in the range of 2-2.5 per cent while all foreign bank respondents expect NPAs to be in the range of 2.5-3 per cent.

As per respondents, some of the sectors that may continue to show NPAs over next six months include Agriculture, Textiles and garments, MSMEs, and Gems & Jewellery.