Indian Banking - Asset Quality Improves, But Remains Monitorable; Capital Position To Improve Further: ICRA
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ICRA Research Report
The second wave of Covid-19 has dented the credit growth prospects in the early months of FY2022 even as a revival in growth was witnessed till February-March 2021.
The YoY credit growth moderated to 5.7% as on June 4, 2021 and may remain slow in the next couple of months as lenders gauge the impact of the second wave on the asset quality.
The deposit growth has been strong at 9.7% as on June 4, 2021, well ahead of the credit growth, thereby indicating abundant liquidity with the lenders and sustainability in the benign interest rate environment in the near term.
With the sector net non performing assets at the lowest levels during the last seven years, legacy asset provisioning will have limited impact on the profitability and capital position of the banks, thereby improving their ability to absorb the incremental stress because of the pandemic.
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