The growth in credit that has been experienced over several months is expected to sustain, along with a rise in private capital expenditure, and will cause a virtuous investment cycle, according to the for 2022 -- 23.
The credit upcycle will be aided by the constant monitoring of the risks in the financial system by the regulators and their efforts to contain them, the Survey said, adding that the Reserve Bank of India's support for growth would ensure sufficient liquidity in financial markets.
The expansion of credit was boosted by the rebound in economic activity in the previous fiscal year after the Covid 19 crisis and a greater degree of financial soundness among banks and corporates since June 2021, according to the Survey.
The YoY growth in non-food bank credit went up to 15.3 per cent in December 2022, with the broad-based growth across sectors, according to the survey.
The Survey has been at a time when growth in deposits has been well above, exerting pressure on banks to mobilise funds. On January 13, deposit growth was at 16.5 per cent YoY, while the deposit growth was 10.6 per cent.
The Survey read that the banking system with a low NPA ratio and more robust corporate sector fundamentals will continue to boost the flow of bank credit into productive investment opportunities, despite rising interest rates.
The accumulation of deposits over the past few years has given banks the ability to fund demand for loans, the survey said, while the incremental credit-deposit ratio for banks went up sharply, clocking in at 122 per cent YoY on an annual basis.
The RBI has implemented several banking reforms over the past decade, with the gross NPA ratio falling to a seven-year low of 5 per cent in September 2022.
As per the baseline scenario of the RBI s stress testing framework, the declining tendency in the GNPA ratio is likely to continue and is projected to drop further to 4.9 per cent in March 2023, according to the Survey.
The government said that retail credit and demand for home loans have fueled the growth of the loan. The government said that an increase in demand for housing leads to greater investment and is a good time to start a virtuous cycle.
Credit to agriculture and related activities gained a boost supported by the government's concessional institutional credit, according to the Survey.