Strong loan growth should benefit net revenue, particularly as it will be coupled with wider net interest margins. However, it will put pressure on Core Equity Tier 1 ratios (CET1) should credit growth exceed Fitch's expectations, limiting buffers to absorb potential future losses, stated Fitch Ratings.

Fitch forecasts India’s real GDP growth at 7% in FY23.

India’s bank credit growth will accelerate in the financial year ending March 2023 (FY23), despite the effects of higher interest rates, says Fitch Ratings. 

Strong loan growth should benefit net revenue, particularly as it will be coupled with wider net interest margins. However, it will put pressure on Core Equity Tier 1 ratios (CET1) should credit growth exceed Fitch's expectations, limiting buffers to absorb potential future losses, stated Fitch Ratings.

Fitch see bank credit expanding by around 13% in FY23, up from 11.5% in FY22. The acceleration will be driven by the normalisation of economic activity after the Covid-19 pandemic, and high nominal GDP growth, which we expect to boost demand for retail and working-capital loans.

Fitch forecasts India’s real GDP growth at 7% in FY23.

The full-year loan growth will represent a modest slowdown from the 17% yoy pace in 1HFY23. This factors in some base effects.