Bankers peg credit growth at 14-16% in FY16

Bank credit is expected to grow by 14-16 per cent this financial year, on gradual pick-up in infrastructure activity, higher working capital needs and the retail segment.

Bank executives and analysts said the real momentum will only be in the second half (October 2015-March 2016). Besides that being the busy season, the effect of the various steps to get stalled projects (in infrastructure) off the ground and auctioning for coal blocks and for telecom spectrum are expected to become visible Stock Market Trading Tips

In FY15, bank credit was Rs 766,305 crore, a 12.6 per cent growth on 2013-14. Almost a third (Rs 266,292 crore) was in the last fortnight. It had grown by 13.8 per cent in FY14 over FY13.

State Bank of India chief financial officer P K Gupta said it was possible to grow the loan book by 14-15 per cent in 2015-16. With the economic growth estimate of 7.8 per cent and a multiplier of 2-2.5 times, credit can grow by about 20 per cent. However, there are constraints.

One, capital expenditure is yet to pick up. Also, many corporate balance sheets are still over-leveraged. They need to raise equity to bring balance Personal Numerology Trading Tips

Asked if further interest rate cuts could speed credit, Gupta said it is only one of the factors.

According to Reserve Bank of India data, consumer credit grew 16.5 per cent in the 12 months into February 2015, better than 15.5 per cent in FY14. With the softening of interest rates, housing credit, the key segment in retail loans, is expected to grow at a higher pace.

IndusInd Bank managing director and chief executive Ramesh Sobti said for the system, non-food credit would grow 15-16 per cent this financial year. His bank could see 25 per cent growth.

Credit to commercial vehicles, stuck in a slow lane due to a slump, could pick up gradually this year, he said Commodity Trading Tips

For credit growth to sustain, infrastructure and industrial activity has to gather momentum. At present what bankers see is only improvement in business sentiment. New project proposals in significant numbers are not there.

IDBI Bank deputy managing director B K Batra said the pipeline of new projects (infrastructure and industrial sector) is thin. But the banking system is better placed at the start of this new financial year for growth than early last year (2014-15).

The system could possibly see 15-16 per cent growth in this financial year. Credit growth will be supported by retail segment. This should, over a period, trigger demand for capital goods. The projects stalled and gradually getting off the ground will require working capital, he said Intraday Trading Tips

Vibha Batra, senior vice-president and financial sector ratings head, ICRA, said the flow of resources from the financial sector, a combination of bank credit and borrowings from the market, could be higher in the financial year.

The pace of bank credit would also be shaped by yield trends in the money and bond markets. The coupon (interest rate) on commercial paper and debentures are ruling much below the base rate of banks. While the latter are 9.75-10.25 per cent, ‘AAA’-rated companies are now able to raise money through bonds at 8.26 percent Nifty Trading Tips