Excess credit growth to limit Indian banks' loss-absorbing ability: Fitch

Rating agency warns capital base of PSBs may come under greater strain

Global rating agency Fitch said on Monday that bank credit growth in excess of 13 per cent year on year in FY23 could put pressure on core equity tier ratios (CET1) of banks, especially public sector lenders. It may limit the buffers of Indian banks to absorb potential future losses.

Bank credit expanded by 11.5 per cent in FY22. Full-year loan growth for FY23 will represent a modest slowdown from the 17 per cent YoY pace in H1FY23. The normalisation of economic activity after the Covid-19 pandemic, and high nominal GDP growth will drive credit offtake.

Rapid loan growth has