Indian Banks Might See More Loan Growth as Economy Recovers, Report Says

Indian banks could see more lending and greater net interest margins this year as the country’s economy recovers, a report from S&P Global says.

Bank credit has boosted to 9.2% year-over-year as of December 2021, the report says, citing Reserve Bank of India data.

Comparably, there was 5.2% growth in March 2021.

The report says the World Bank expects the Indian economy to grow 8.3% for the current financial year ending in March. There is an expected 8.7% rate of growth next year.

“Indian banks are ready to shift into a growth phase, just in time to meet rising demand as the country’s economy recovers,” said Nikita Anand, associate director for credit risk at S&P Global Ratings. “Faster loan growth will be bolstered by improving asset quality and a normalization in credit costs over the next 12-18 months.”

A Jan. 17 report from central bank economists says India’s economic activity is still going strong, and there have been upticks in numerous indicators, including consumer and business confidence.

That said, the report adds that the global economic growth is likely to fall, due to the Omicron COVID-19 variant that has been surging for the last few months, along with other factors like inflation, debt and income inequality.

The report says there could be a brighter future due to better balance sheets and more of an appetite for small and midsized enterprise lending, which could improve overall credit growth to over 10% in 2022 and around 12% or 13% after that.

PYMNTS reported recently that India’s economy is seeing more activity in the digital payment world, for example, through payments platform Razorpay, which is making a B2B ecosystem for businesses in the country.

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The company has been working with the national Unified Payments Interface (UPI) system, which has been bringing services for business clients, including tax payments, neobanking and lending.

Razorpay CEO and Co-founder Harshil Mathur told PYMNTS that India’s 2017 demonetization had led to more of a desire for digital services. He said it became big because “suddenly nobody had cash and every major business in India wanted to go digital,” adding that it would help businesses go online more quickly and easily.