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Ratings agency Crisil in its latest report has said that banking system's credit growth will almost double to 10 percent in 2021-22 on the back of economic recovery and policy interventions. It said the quantum of gross non-performing assets (NPAs) will rise up to 10.5-11 percent by the end of 2021-22, which is about a percentage point lower than what was initially expected. It also noted that the GDP growth is expected to stand at 11 percent for the newly begun fiscal year, after a 7.7 percent contraction in the covid-19 pandemic-impacted 2020-21. 

According to the report, the second and third waves of covid-19 infections are a risk to economic recovery but it may not result in widespread lockdowns and a faster vaccination drive will also help. From banks' credit growth perspective, it said the expansion will accelerate by 4-5 percentage points to 9-10 percent in 2021-22. The faster credit growth will be led by retail loans, which are expected to grow in mid-teens, while corporate loans, which de-grew during 2020-21, are also likely to show a 5-6 per cent jump.

The agency further said corporate loans, which account for nearly half of the overall bank credit, were subdued in 2020-21 because of low capital expenditure (capex) and also impact on demand which curtailed the need for working capital. With the revival in the economy, stimulus measures by the government and the RBI and the Budget's focus on infrastructure, the same is expected to see an uptick.