The outlook for banks is expected to be stable amid an 8.9-10.2 percent improvement in credit growth and a fall in provisions in the current budget, rating agency ICA Ratings said on Tuesday.
Banks’ gross non-performing advances (GNPAs) are expected to fall to 5.6-5.7 percent in March 2023, from an estimate of 6.2-6.3 percent in March 2022.
ICRA Ratings expects the outlook for banks to be stable in FY23, based on continued improvement in earnings driven by improved credit growth of 8.9-10.2 percent in FY23 (8.3 percent for FY22 (expected) and 5.5 percent in FY21) and a decline in loan impairments,” the agency said in a report Tuesday.
Credit growth would come from loans in the non-food segment, which continue to be driven by the retail and SMB segments, and in part from co-loan arrangements with non-bank finance companies (NBFCs), it said. In the wholesale credit segment, growth will be supported by a shift in demand from debt capital market to bank credit in a scenario of rising interest rates, as seen in FY19.
The agency expects Treasury yields to decline significantly in FY23 in a scenario of rising bond yields.
In terms of asset quality, gross non-performing advances are expected to fall to 5.6-5.7 percent in March 2023, from an estimate of 6.2-6.3 percent in March 2022, while net non-performing advances will fall to 1.7-1.8 percent from an estimate of 2 percent in March 2022,” said the agency’s vice president, Anil Gupta.
Loan and other provisions are estimated to decline to 1.3-1.4 percent of advances in FY23, from an estimated 1.7-1.8 percent in FY22.