According to the rating agency, expectedly, there will be a greater competition for deposits over time. Fitch forecasts that real GDP growth India will be at 7 per cent in 2022-23. The system deposits may grow 11 per cent during current and next fiscal years, which reportedly will be slower than loan growth
Fitch Ratings said that bank credit in India will witness strong growth in current financial year in spite effects of higher interest rates, on 28 November.
The strong loan growth may benefit net revenue, specifically as it will be coupled with wider net interest margins, it added
The rating agency in a statement, said “We see bank credit expanding by around 13 per cent in FY23, up from 11.5 per cent in FY22. The acceleration will be driven by the normalisation of economic activity after the COVID-19 pandemic, and high nominal GDP growth, which we expect to boost demand for retail and working-capital loans,”
Fitch forecasts that real GDP growth India will be at 7 per cent in 2022-23. Indian banks generally remain open to additional capital-raising to fund growth, in spite of the rise in rates, it said.
“Private banks are generally better than state banks at capital planning, although moves to raise fresh equity are likely to be opportunistic and incremental,” the statement added.
According to the rating agency, expectedly, there will be a greater competition for deposits over time. To quote an example, it will be on upper band via higher rates on deposit accounts, as banks’ liquidity buffers fall in their pursuit of loan growth.
Also, Fitch expects that system deposits may grow 11 per cent during current and next fiscal years, which reportedly will be slower than loan growth.
“Increased deposit rates may put some pressure on banks’ margins, but we expect declining credit costs to offset pressures on profitability – including the valuation impact of higher rates on investments – in FY23,” as per the statement.