Retail, MSME credit growth to be robust; corporate lending normal: IBA

Credit growth in retail and MSME sectors is expected to be robust, while corporate lending may be normal due to geopolitical issues, says IBA's Surinder Kumar Thapar. He added that retail loan stress is not a concern due to improved onboarding.

Credit growth in the retail and MSME segments is expected to remain robust in FY27, while corporate lending may be normal due to geopolitical uncertainties, Surinder Kumar Thapar, Senior Advisor, Indian Banks Association, told ANI on Thursday.

"MSME & retail, the credit growth is going to be robust. Corporate definitely due to geopolitical issues growth may be normal, but we have seen in the previous years also that credit growth in the retail and other sectors has been very robust," Thapar said.

He further said, "On the personal side, retail and MSME growth will be very good. On the corporate side, geopolitical issues are there so that will remain normal." The remarks came on the sidelines of the 6th Edition of PICUP Fintech Conference organised by the Indian Banks Association with FICCI.

Loan Stress and Asset Quality

On stress in loan segments, Thapar said retail portfolios are not showing signs of concern due to improvements in onboarding processes.

"Retail loan, I don't feel that much stress is there because now the onboarding process has improved quite a lot in the banks and digital onboarding is being done and information on customer behaviour is also obtained through CICs and other information from social profiles is also tracked while onboarding the customers," Thapar said.

"So, I am not foreseeing any stress in the retail segment. Asset quality has improved a lot now," he said.

Pressure on Deposit Growth

While credit growth is seen as robust, he expected deposit growth to remain under pressure as investor preferences shift towards other instruments.

"Deposit growth has been under pressure due to new fintech instruments which have come in the market. People's risk appetite has changed. They have started investing in other market instruments like stock exchange, mutual fund, ETF, gold, etc. So, deposit growth is a challenge. But it is growing still at a good rate," he said.

Improved Onboarding and Asset Quality

On asset quality, Thapar said there has been significant improvement due to better processes.

"Asset quality has improved a lot and since I told you that onboarding processes have improved quite a lot and many digital processes have been started by the banks for onboarding customers. So, they have been doing cherry picking basically," he said.

Technology Adoption and Cybersecurity

Talking about technology adoption, he said banks are increasingly using artificial intelligence.

"AI and agentic AI use cases are being developed by banks to improve the customer service, customer onboarding, collections and recovery, Thapar said.

He added that cybersecurity remains a key focus area and banks are very much agile to this and many guardrails have been introduced to make banks more resilient and the banks have put a lot of initiatives in the cyber security also.

Global Risks and Inflation Outlook

Commenting on the global risks, Thapar said oil price volatility remains a concern but is manageable.

"Oil price volatility is definitely an issue because geopolitical issues are there. So, that's how the inflation forecast has also gone up slightly. But still it is under control. But I feel that the government will be able to manage it properly. RBI is looking very proactive. In the last policy review, they have also taken the stock of the position and told that things are under control, inflation is under control and they are currently monitoring it proactively," he said.

ESG and Credit Access

"On ESG, banks have done substantially progress and the regulator has also come out with a guidance note. Banks have developed capabilities to measure the climate risk and transition risk, he said.

Responding to the query on improving credit access for small businesses, he highlighted the success of co-lending arrangements.

"Co-lending has been a very good tool for the market because banks are not able to reach to each and every area, tribals and remote and below the pyramid segments. So, many NBFCs or MFIs are very active in those areas but they lack the resources. So, banks have gone into a co-lending arrangement with them," he said. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)