Business Bureau :
The banking system’s credit growth will plummet to a multi-decadal low of up to 1 per cent in FY21, domestic credit ratings agency Crisil said on Thursday. For non-banking finance companies (NBFCs), the shock will be more pronounced and assets under management (AUM) may decline by up to 3 per cent during the fiscal, impacted majorly by wholesale segment, it said. It can be noted that non-food credit growth was at 5.5 per cent as of August 28 as compared to the year-ago period.
Lenders have been undertaking targeted measures to increase the growth and are pinning hopes on festive season for growth to go up. Generally, bank credit growth is said to be directly linked to the economic activity, which is set to contract by over 10 per cent in FY21. “Given the grim economic outlook, the banking system's credit growth will come at between 0-1 per cent in FY21. This will be a multi-decade low,” the agency’s senior director Somasekhar Vemuri told reporters on a call.
For NBFCs, credit growth will be in negative zone and assets under management will decline by 1-3 per cent in the fiscal year, he said. From an asset quality perspective as well, NBFCs will be more impacted than the banks, he added. NBFCs are likely to witness a 0.50 to 2.50 per cent surge in delinquencies this fiscal, driven largely by the small business and wholesale segments, the agency said.