Will Rising Rates Hurt Banks Credit Growth? Nirmal Bangs Thematic View

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Nirmal Bang Report

We anticipate the bank credit growth in FY23 to be ~15%, in line with the nominal gross domestic product growth. In fact, our proprietary credit growth model estimates a higher credit growth of ~19% for FY23. But, our model has underestimated and overestimated credit growth during the pandemic period due to Covid-19 related measures announced by the Government, such as the emergency credit line guarantee scheme, and elevated inflationary pressures.

For sure, credit growth has deviated from nominal GDP growth in FY21 and FY22 too. However, we expect it to be broadly in line with nominal GDP growth in FY23.

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