Business / India's bank credit growth to touch low of 0-1% in FY21: CRISIL

CRISIL said India's bank credit growth may fall to 0-1% in FY21 due to coronavirus pandemic. CRISIL had projected an 8-9% credit growth before the pandemic, which is now expected to be impacted by 800 basis points. "The corporate loan portfolio, which constitutes almost half of total credit, is expected to be the worst-hit," CRISIL's senior director Krishnan Sitaraman said.

Deccan Herald : Jun 09, 2020, 09:05 PM
New Delhi: Indian banks’ loan growth will slow to nil to 1% in the year started April 1, according to the Indian unit of S&P Global Ratings.

That’s lower than 6.1% the previous fiscal year, which was already a multi-decade low. Corporate borrowings, which account for half of total credit, will be worst-hit and loans to individuals will decelerate to “low single digits” from “mid teens” in the past few years, Crisil Ltd. said in a report Monday.

Reeling under the worst bad-loan ratio in the world, Indian banks have turned risk-averse as the strict shelter-at-home rules have shuttered businesses and left millions jobless. Prime Minister Narendra Modi is counting on fresh credit to spur an economy hurtling toward a rare contraction.

“This crisis is unprecedented and so will its economic fallout be,” said Crisil’s Senior Director Krishnan Sitaraman.

Even before the coronavirus pandemic, India’s $1.7 trillion financial sector had been weakened by a festering shadow banking crisis that surfaced in 2018 and spilled over into banks and mutual funds, pushing up bad loans and eventually leading to the bailout of a private sector bank in March.

Crisil predicts loan growth will pick up to high single digits in the next financial year.