Crisil expects personal loan growth rate to moderate in FY25
According to Crisil, the impact of stagnant corporate loan growth and fall in unsecured loan growth rates will slowdown overall bank credit growth rate to 14 per cent in FY25 from 16 per cent in FY24.
Credit rating agency, Crisil, expects personal loan growth rate moderation in financial year 2024-25 (FY25) due to stringent steps undertaken by the Reserve Bank of India (RBI) in the recent past on sanction of such loans by various banks in the country. To counter rising delinquencies in unsecured loans, the apex bank had increased the risk weightage on personal loans by 25 basis points. Consequently, banks would have to realign their strategies and strengthen their underwriting processes. This the agency cites as the main reason of expected moderation in the growth rate in FY25.
In last few years, the country has seen worrisome rise in applications for unsecured personal loans leading to delinquencies and the RBI action.
According to Crisil, unsecured consumer credit accounts for 25 per cent of retail credit in the country.
The agency believes that consequently, retail credit which currently accounts for 55 per cent of total bank credit, will also see moderation in growth and fall to 16 per cent in FY25 from 17 per cent in the preceding fiscal.
On the other hand, the corporate segment is expected to maintain FY24’s growth rate of 13 per cent in the subsequent fiscal as well. Combined impact of corporate loan growth rate stagnation and fall in unsecured loan growth rate will slowdown overall loan growth rate to 14 per cent in FY25 from 16 per cent in FY24.
The corporate segment accounts for 45 per cent of the overall loans.
Apart from slowdown in unsecured credit, other prominent reasons behind overall moderation in FY25 will be preceding fiscal’s high base, slower deposit accretion and lower GDP growth rate. According to Crisil, FY25 is expected to see GDP growth rate fall to 6.8 per cent from 7.6 per cent in FY24.
Apart from all these, Crisil also made forecasts on private capex. Th eagency said private capex will revive in second half of FY25. Crisil said on the corporate front, that, steel, cement and pharmaceuticals would lead the capex recovery.
Crisil, senior director, Ajit Velonie, said emerging sectors such as electronics and semiconductors, electric vehicles (EVs) and solar modules would also contribute to capex in FY25.