Credit growth likely to be muted at 8% this fiscal: Assocham

A slowdown in the economy coupled with high stress level in the banking sector is expected to restrict credit growth at around 8 per cent during the current fiscal despite government’s thrust on loan expansion, says a study by industry chamber Assocham. However, this would be slightly better than the five decade low growth of 5.1 per cent in non-food credit recorded for the financial year ended March 2017. Growth in the credit this year would be mainly driven by the retail segment and farm loan, it said, adding expansion could also be contributed by some segments of the industry related to infrastructure if they pick up in the second half of the current fiscal. There could be some uptick in lending towards the micro, small and medium enterprises (MSME) sector with the government asking banks to increase their exposure to the sector as they are one of the largest employers, it said. Non-performing assets (NPAs) of public sector banks have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.78 lakh crore in March 2015. Notably, the corporate sector is not getting loans from banks as lenders have become risk averse due to mounting NPAs. To make matter worse, companies with good ratings are tapping market as rates are cheaper in the bond markets.