SME, retail could drive double-digit credit growth for some banks, says BNP Paribas

Santanu Chakrabarti of BNP Paribas believes many banks could achieve credit growth ranging from high teens to 20% for the year.

In an interview with CNBC-TV18, Chakrabarti highlighted some noteworthy trends from the recent business updates of various banks.

Credit growth remains robust, he said, highlighting the alignment between banks' detailed growth data and the broader systemic data. He emphasised that SME and retail sectors are driving growth while significant industrial credit expansion is on the horizon.

“Firstly, credit growth is definitely not slowing down. What is very interesting is the growth granularity that has been provided by the banks is also squaring with the data that was available at the system level, which is essentially that some of the SME and retail segments seem to be leading the growth and large-scale industrial credit pickup is still some time away,” he said.

Despite the fact that term deposit rates haven't seen substantial increases in the past three to four months, they continue to demonstrate resilience.

He noted that deposit growth is gradually approaching credit growth, as expected in this downstream trend.

However, CASA growth continues to stay at low levels.

“We are now at a part of the cycle where the legacy term deposit portfolio given that most term deposit portfolios are 2-3 years of average duration is not that much of a price differential from what the incremental rates are coming in at,” he said.

Regarding net interest margins (NIMs), he anticipates no major dramatic shifts.

“For most, we have penciled in something like 5-10 basis points (bps) for the quarter and about 10-15 bps for the full year, which is not very dramatic,” he said.

He suggests that investors exercise caution when making purchases within the public sector undertaking (PSU) banks.