ICRA revises outlook on Banking sector to positive

“In our view, the earnings will largely be sufficient for most banks to meet the regulatory as well as growth capital requirements and public banks will have limited dependence on the Government of India (GoI) for capital. The improved growth and earnings outlook has also improved investors’ appetite, which shall also enable banks to raise capital from the markets, if required,” the rating agency said in a press release.

Commenting further, Anil Gupta, Senior Vice President and Co-Group Head of ICRA said: “Incremental credit growth in FY2023 is expected to remain at an all-time high of ₹18.0-19.0 trillion in FY2023, which will be significantly higher than the previous high of ₹11.4 trillion in FY2019. Further, the growth momentum is expected to remain strong in FY2024 as well, even though rising interest rates and tight liquidity conditions could moderate the growth.”

While retail, micro, small and medium enterprises (MSME) and agriculture have been the key segments for credit growth in the recent past, rising yields for overseas borrowings and in domestic capital markets have created a conducive demand environment for wholesale funding from banking channels, the press release said.