The near-term credit growth for the private sector banks will be driven by retail, agriculture, small and medium enterprises segments.
The near-term credit growth for the private sector banks will be driven by retail, agriculture, small and medium enterprises segments.
Mumbai
: Private sector lenders will witness an annual credit growth of 24 per cent till financial year 2019, twice that of their ailing and capital-starved state-run peers, domestic ratings agency Crisil said today.
-"Advances of private banks are likely to grow at a compounded annual growth rate of 24 per cent between fiscal years 2016 and 2019, materially ahead of 12 per cent for public sector banks over the same four-year period,-" it said.
Factors aiding this aggressive loan book growth will be private sector lenders' strong balance-sheets, large presence in retail segment and strong low-cost liability franchise, it said. Private sector banks' loan books have grown at 21 per cent per annum in the five years to FY15, as against a 17 per cent for state-run lenders, it noted.
Crisil had first estimated that private sector banks would grow their loan books at twice the pace in a May 2015 report, pointing out to availability of capital as a big plus.
-"Generation of capital won't be easy for state-run banks given their muted profitability and difficulty in diluting government stake because of poor valuations. Also investor appetite for non-equity tier-I instruments is yet to be fully tested. Consequently, we expect state-run banks to grow at half the pace of their private sector peers for the next four years,-" Crisil Director Rajat Bahl had said.
The banking system will close the ongoing FY16 with a credit growth of 11 per cent, it said in the study commissioned by industry lobby Assocham. The near-term credit growth for the private sector banks will be driven by retail, agriculture, small and medium enterprises segments, it said.
-"Private sector banks have an expertise and can offer quick end-to-end solutions to customers in these segments as they have invested significantly in developing branch network, retail franchise and technology platforms,-" the report said.
State-run lenders, which at present hold over 70 per cent of the system, -"will be forced to focus on reorienting their business model and become more competitive and will need to increase focus on improving their performance instead of chasing growth-", the report said.
Apart from this, state-run lenders should also focus on improving governance and their customer connect, it said. Small and mid-size PSBs will face -"greater challenges-" and have to focus on developing regional expertise and small-ticket lending in retail and SMEs segments.
The report said PSBs will face competition across the spectrum as private lenders will give them a tough time in the low-yielding mortgages, auto, while in the high-yielding loan against property, used vehicles, personal loans, gold loans, it would be NBFCs which will be leading.
