Credit Growth Slowdown Looms Over Banking Sector Amid Regulatory Tightening

Icra projects a slowdown in credit growth for banks and NBFCs due to regulatory measures and tighter funding conditions. Incremental bank credit growth is expected to decelerate to Rs 19-20.5 lakh crore in 2024-25. Unsecured lending segments like microfinance face rising delinquencies amid funding constraints.

Icra anticipates a significant slowdown in credit growth for banks and non-bank financial companies (NBFCs) due to regulatory measures and stricter funding conditions in domestic markets.

The agency estimates that incremental bank credit growth will decelerate to Rs 19-20.5 lakh crore in 2024-25, marking a 12% Year-on-Year growth, compared to the 16.3% increase seen in the previous fiscal year.

NBFCs are expected to experience a stark decline in asset growth to 16-18% this fiscal year from 25% in 2023-24, with high lending rate segments like microfinance already showing rising delinquencies.