Updated January 25th, 2024 at 14:01 IST
Indian private banks stay committed to loan growth targets amid increasing challenges
Kotak Mahindra Bank has affirmed that its loan book is poised to achieve growth in the "high teens" in the next fiscal year, IndusInd Bank is equally bullish.
Loan growth targets: Private banks in the country are standing firm on their loan growth targets for the upcoming fiscal year, anticipating sustained expansion in the "high teens." Despite hurdles in raising deposits and the imposition of stricter capital requirements by the Reserve Bank of India (RBI), these banks remain optimistic about their lending prospects.
Last November, the RBI increased capital requirements for personal loans, credit cards, and lending to non-banking finance companies (NBFCs). Despite this, rather than impeding loan growth, banks have chosen to absorb the higher capital requirements.
Kotak Mahindra Bank has affirmed that its loan book is poised to achieve growth in the "high teens" in the next fiscal year. IndusInd Bank is equally bullish, expecting credit growth to reach 18-20 per cent for both the current fiscal year and the following one. RBL Bank projects a 20 per cent growth over the next two years, while HDFC Bank and ICICI Bank, two of India's largest private banks, have not publicly disclosed their loan growth guidance for the upcoming year.
Credit expansion is anticipated to be driven by various sectors, including vehicle finance, consumer finance, and microfinance, according to Sumant Kathpalia, the Chief Executive Officer of IndusInd Bank.
Over the past 12 months, Indian banks' credit has experienced a growth rate of 15-16 per cent, excluding the impact of the merger between HDFC Bank and its parent HDFC Ltd. Unsecured loans and credit cards have witnessed the most substantial expansion.
Jaimin Bhatt, the Group Chief Financial Officer of Kotak Mahindra Bank, highlighted the bank's historical growth pattern, stating, "If you take the nominal GDP, we would typically end up in the space of 1.75 to 2X that growth at a time when we want to grow." Bhatt also said that the RBI's increase in risk weights would not impede the bank's unsecured loan growth.
Despite facing capital hits due to higher risk weights, private banks, including HDFC Bank, ICICI Bank, and IndusInd Bank, maintain robust capital ratios, supporting their commitment to loan growth.
RBL Bank has asserted that it does not foresee the need to raise fresh capital for the next six to eight quarters. However, despite the resilience of private banks, tight liquidity conditions and the reluctance to increase deposit rates have led to a 6.7 per cent deficit in bank deposit growth compared to credit growth across the system. Some lenders may be compelled to moderate loans in response to these circumstances.
Puneet Sharma, Chief Financial Officer of Axis Bank, commented in a post-earnings conference call this week, stating, "Given where system liquidity is, loan growth will converge with deposit growth in the long term."
(With Reuters inputs.)
Published January 25th, 2024 at 14:01 IST