Survey by FICCI and IBA Predicts Strong Credit Growth for Indian Banks
A recent survey conducted by the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Indian Banks’ Association (IBA) suggests a positive outlook for non-food industry credit growth over the next six months. According to the survey, 62% of participating banks expect non-food industry credit growth to exceed 12%.
The nineteenth round of the FICCI-IBA survey covered the period from January to June 2024 and included 22 banks from the public, private, and foreign sectors. These banks represent about 67% of the banking industry by asset size. The survey found that the Indian economy and banking sector remain robust and resilient, with banks supporting economic activity through sustained credit expansion.
However, the survey also noted that credit growth is outpacing deposit growth, which could lead to liquidity challenges. Raising deposits to match loan growth and keeping credit costs low are top priorities for banks. Long-term credit demand has continued to grow in sectors such as Infrastructure, Metals, Iron and Steel, and Engineering. Notably, 77% of respondents indicated an increase in long-term loans for the Infrastructure sector, likely due to the government’s capital expenditure push.
The survey also highlighted a decrease in the share of CASA (Current Account Savings Account) deposits, with term deposits gaining pace due to higher interest rates. A significant 80% of Public Sector Banks reported a decrease in CASA deposits, while over half of the private sector banks observed the same trend.
In terms of Non-Performing Assets (NPAs), 71% of respondent banks reported a decrease in NPA levels over the last six months. Among Public Sector Banks, 90% cited a reduction in NPAs, while 67% of private sector banks reported a decrease. All foreign banks reported no change in NPA levels. Sectors like Textiles, Infrastructure, and Food Processing continue to show high levels of NPAs.
Looking ahead, over half of the respondent banks believe that Gross NPAs will be in the range of 2.5-3% over the next six months. Some sectors that may continue to show NPAs include Agriculture, Textiles and Garments, MSMEs, and Gems & Jewellery.
Doubts Revealed
FICCI -: FICCI stands for the Federation of Indian Chambers of Commerce and Industry. It is an organization in India that represents businesses and industries, helping them grow and solve problems.
IBA -: IBA stands for the Indian Banks’ Association. It is a group that represents banks in India, helping them work together and address common issues.
Credit Growth -: Credit growth means the increase in the amount of money that banks lend to people and businesses. It shows how much more people are borrowing from banks.
Non-food industry credit -: Non-food industry credit refers to loans given by banks to industries other than those related to food production, like manufacturing or construction.
Liquidity challenges -: Liquidity challenges happen when banks don’t have enough money available to meet the demands of people who want to withdraw their deposits or need loans.
Infrastructure -: Infrastructure includes basic facilities and systems like roads, bridges, and power supplies that are needed for a country to function properly.
Engineering -: Engineering is the application of science and math to design and build things like machines, buildings, and roads.
NPA levels -: NPA stands for Non-Performing Assets. These are loans that borrowers are not repaying on time, causing problems for banks.
Public Sector Banks -: Public Sector Banks are banks that are owned by the government. They provide banking services to the public and are controlled by the government.
