Medium-term credit growth set for headwinds, predicts India Ratings

Capex revival could get delayed as companies await clarity on the macroeconomic front, says agency.

Inflation, supply chain disruptions and a weak consumption demand could upset the revival in credit growth in the medium term, according to India Ratings.

The reversal of the interest rate cycle--marked by the Reserve Bank of India’s 40 basis points increase in policy repo rate--would weigh down credit growth as borrowings become costlier. India Ra, based on the feedback from rated issuers, projected that capex revival could get delayed as companies await clarity on the macroeconomic front. Furthermore, the war in Ukraine has raised concerns on the continuation of the pace of exports.

However, banking system credit growth has shown a significant