Business Standard

Most banks see meaningful credit growth recovery only after 18 months

Most banks believe that meaningful credit growth recovery is likely only after 18 months, while near-term uncertainty on asset quality remains, brokerages tracking the development said

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IANS New Delhi

Even though the unlock phases have kickstarted economic activities in various sectors, most banks believe that meaningful credit growth recovery is likely only after 18 months, while near-term uncertainty on asset quality remains, brokerages tracking the development said.

According to a report by Emkay Global Financial Services, banks believe that credit growth will see a meaningful revival only from H2FY22, while margins could face dual pressure from lower loan-deposit ratio/interest reversals once NPA formation accelerates.

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"Moratorium rates have inched up in select retail segments a bit post June, while bankers await clarity on corporate restructuring," the brokerage report said.

 

It added that though the activity levels seem to be back to pre-Covid-19 levels in agro-chem, pharma, FMCG staples, paints, steel, gas and lubricants segments and almost all companies agreed the worst is behind on economic activity, the views on the pace of recovery differed over a mix of timeframes.

The auto sector is more optimistic of an earlier recovery (as early as the current quarter), based on healthy rural demand, new product launches and some help from exports. IT services companies, on the other hand, are looking at strong deal pipelines but the conversion timeline is uncertain.

Cement and building material companies have seen some recovery over the last couple of months already, with healthy pricing trends expected to continue, while OMCs/gas/petchem business levels appear to be reaching normalcy quite quickly, the brokerage report said.

Pharma and agro-chem companies have shrugged off any hints of Covid-19 disruption, with the latter expecting growth north of 15 per cent yoy in FY21.

Insurance companies are affected by the overall drop in demand for their savings proxies and weak credit growth (for credit protect products).

--IANS

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(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Aug 25 2020 | 5:59 PM IST

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