The foreign brokerage said it expects the growth recovery will be gradual as corporate deleveraging continues and for growth to be contingent on a full pickup in retail credit growth.
Bank credit grew by 6% on a year-on-year basis in November compared with 7.2% in the corresponding period in the previous year, data from the RBI showed.
“We expect gradual credit growth recovery to 8/9.5% by FY2022/23. With a weak capex cycle, retail growth would need to recover to more than 15% YoY growth,” said CLSA.
The foreign brokerage said retail loan growth has driven about 50% of credit growth post FY15 while retail and bank lending to non-banking financial companies has driven 70-75% of credit for banks.
In the absence of a credit-driven capex cycle, overall credit growth should remain dependent on retail growth, the brokerage said.
CLSA said corporate deleveraging and cheap bond/CP funding continued to hinder banks’ corporate loan growth in November but retail credit picked up as expected.
“Sequential net retail book growth of about Rs 300 billion in November and Rs 1 trillion in September-November implies 15% annualised growth for retail loans. The key will be if retail growth continues after the festive season,” said CLSA.