Banking Sector Watch: Industry loan growth rate expected to be 15-16% in FY23, says JM Financial's Sameer Bhise

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In the post-COVID-19 phase, the banking sector has picked up the pace, and is likely to register an industry loan growth of 15-16 percent in fiscal year 2023, said Sameer Bhise, Banking Research Analyst, JM Financial Institutional Securities, while speaking to CNBC TV-18 on September 20.

"We expect (industry loan) growth of 15-16 percent year-on-year in FY23," Bhise said, adding that the surge would be "primarily driven by greater working capital utilisation".

The conditions remain positive for the banking sector, the expert pointed out, citing the ebbing of the threat posed by the coronavirus pandemic, and the energy prices relatively stabilising, as compared to the period following the outbreak of Russia-Ukraine war.

"Retail lending has come back...energy prices which were looking precarious have now come off from the highs," he said.

"Banks continue to be in good shape, with respect to retail risk appetite. The ability to lend and the willingness to lend has gone up, and that is helping the overall credit growth," Bhise added.

At the same time, analysts will be observant of how deposit growth shapes up in the second half of FY23, even as incremental LDR (loan-to-deposit ratio) on a 12-month basis have moved to over 100 percent for the system, he noted.

"Deposit rates should start moving up meaningfully in Q3 and Q4," Bhise further said.

While analysts are sounding upbeat about the banking sector, it remains to be seen whether the hike in lending rates, announced by the Reserve Bank of India to combat inflation, will adversely affect the lending cycle.

The central bank's Monetary Policy Committee will meet from September 28-30 to review the current interest rates. In the last meeting held in August, the repo rate was hiked by 50 basis points to 5.4 percent, taking the policy rate back to the late-2019 levels.