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Indian Bank credit growth could moderate in FY25 on tighter liquidity: S&P
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S&P Global Ratings has said strong credit growth of Indian banks could moderate to 12-14 per cent in the next fiscal (FY25) if deposit growth remains tepid. It said banks may be compelled to look for wholesale funding. It added that higher costs of such funding could further strain margins and hurt profitability.
It stated rising cost of funds and potential rate cuts in fiscal 2025 will squeeze net interest margins. It expects the share of unsecured personal loans in the banks' total loan book to continue to rise. This will also help banks to partly mitigate the downside risks to margins from tighter liquidity.
Besides, it said the Reserve Bank of India's recent ruling on applying higher risk weights to unsecured personal loans has not yet hindered rapid growth in this segment. Stable asset quality and steady capitalisation support the banks' credit profiles.
