Home / Companies / News /  Multiple rate hikes may hit credit growth: Care Ratings

NEW DELHI : New Delhi

Multiple interest rate hikes may slow credit growth in India even though the banking sector could continue seeing double-digit loan growth in 2022-23, Care Ratings said in a report.

The Reserve Bank of India has already raised the repo rate four times in FY23, and additional hikes are expected during the year. Deposit rates are also expected to rise as competition for deposits increases thanks to strong underlying credit demand.

“Banks that have a higher current account and savings account (Casa) share and proportion of floating loans are expected to benefit and protect the net interest margin (NIM) in the current rising interest scenario. NIMs are expected to increase in the short term and then stabilize with negative bias due to the repricing of liabilities," it said.

It said banks have already witnessed significant treasury losses in Q1FY23, further, the yields on bond have stabilized in Q2FY23. As per an earlier Care Ratings report, the yield on 10 year government bonds is expected to be 7.5-7.75%.

“Hence, incremental mark-to-market losses are not likely to be as severe in the coming quarters. Nevertheless, treasury income is expected to be muted for FY23," it said.

The gross non-performing asset (GNPA) ratio of scheduled commercial banks is expected to be around 5% in FY23 and reach pre-AQR (asset quality review) levels of about 4% in FY24 due to lower incremental slippages and reduction in restructured books.

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