Commercial banks credit growth to moderate to 12-14% in Fy25: Moody's

Credit growth in Indian commercial banks is expected to moderate to 12-14% in FY25 due to resource-raising challenges and regulatory concerns on unsecured credit, according to Moody's and ICRA. This follows a 16.3% growth in FY24. Stress in some loan segments will also impact growth. \r

The RBI noted a 3.1% gap between credit and deposit growth rates as of May 2024. Banks' net interest margins are expected to soften, but system-wide returns will remain healthy. Non-banking finance companies (NBFCs) will see moderated growth, especially in non-mortgage retail loans. \r

NBFC asset quality and earnings will weaken, with a rise in non-performing assets and increased cost of funds. Enhanced RBI oversight will bolster financial stability.