Banks Will See 15–16% Credit Growth In Two Years, Says Morgan Stanley's Sumeet Kariwala

The Indian banking system is likely to be in a positive growth cycle for at least two to three years, according to Sumeet Kariwala, executive director at Morgan Stanley India.

Kariwala said that as opposed to the market expecting credit growth of 12–13% in the coming years, Morgan Stanley India is pencilling in credit growth at 15–16%.

"You are seeing very strong risk appetite opening up and very strong demand, which is why retail and SME (small and medium enterprises) are going to surprise on the upside," Kariwala told BQ Prime in an interview. He was speaking on the sidelines of Morgan Stanley’s India Investment Forum in Mumbai.

Even on the wholesale lending front, India's banks are witnessing rising working capital demand. While the pace of working capital growth will continue, banks may not see the sharp rise they saw in the last year as the economy stabilised after the COVID-19 pandemic.

As far as corporate capital expenditure from private firms is concerned, while announcements have picked up meaningfully, there is still some time to go before it translates into actual investments.

"There is some delay in implementation because some entrepreneurs are worried about elections or they are worried about geopolitical developments," Kariwala said.

They are worried about interest rates, demand, and other factors, according to Kariwala. "But this is something that is going to subside in the next six to nine months."

Considering the level of capacity utilisation and the state of bank balance sheets and corporate balance sheets, there is likely to be a corporate capex cycle over the next one to two years, he said.

"So when people are talking about 12–13% credit growth, my point is that just expand your horizon to one to two years," Kariwala said. "This ought to happen."

As this happens, credit growth will be 16–17% in two years' time, he said.

Watch the full conversation here: