HSBC Revises Credit Growth Estimate For Banks Amid Slowing Trends

HSBC has revised its credit growth estimate for Indian banks to 11.5% year-on-year for FY25, down from the previous estimate of 12.5%, citing slowing growth trends across most lending segments.

The revision comes as non-food credit growth for the banking system moderated to 10.7% year-on-year in February 2025, down from 11.2% in January 2025.

The slowdown in credit growth was observed across various segments, with the exception of Micro, Small, and Medium Enterprises, where growth remained stable.

Retail loans grew by 11.7% year-on-year in February 2025, driven primarily by secured segments such as home loans, gold loans, and vehicle loans. However, growth in unsecured personal loans and credit card receivables moderated.

Corporate credit growth also slowed to 8.5% year-on-year in February 2025, down from 9.5% in January 2025. The decline was particularly notable in sectors such as infrastructure, metals, chemicals, and petroleum.

Additionally, credit growth of Non-Banking Financial Companies moderated to 6.4% year-on-year in February 2025, compared to 7.7% in January 2025.

HSBC's analysts noted that deposit growth remains a challenge, with a year-on-year growth rate of 10.2% as of March 7, 2025. The loan-to-deposit ratio constraints and weak demand are contributing to the moderation in loan growth. The analysts emphasised that any pick-up in deposit growth, higher government spending, and stronger corporate credit demand would be key drivers for system loan growth.

Despite the overall slowdown, credit to MSMEs showed resilience, growing by 13.4% year-on-year in February 2025. This growth was broad-based across most key segments within the MSME sector.

HSBC's revised credit growth estimate reflects the current challenges faced by the Indian banking sector, highlighting the need for strategic measures to boost credit demand and support economic growth.