Banks, NBFCs' credit growth to see steady slowdown in FY25, says ICRA

According to ICRA, the credit growth for banks and non-bank financial companies (NBFCs) is expected to slow down in FY25. Incremental bank credit growth is projected to decrease to Rs 19.0-20.5 trillion, a 12% year-on-year growth, compared to Rs 22.3 trillion in FY24. For NBFCs, growth in assets under management (AUMs) is expected to slow sharply to 16-18% in FY25 from 25% in FY24. The slowdown is influenced by regulatory actions, including a ban on fresh lending by some entities and tighter funding conditions. These factors are expected to push banks and NBFCs to adjust their business practices and models, impacting near-term growth. The demand for retail credit remains strong, but regulatory measures to prevent overheating in certain segments will moderate growth. The credit costs for microfinance institutions are expected to rise, reflecting increased stress and write-offs. Overall, the regulatory environment and funding challenges are key factors driving the slowdown in credit growth.