(Bloomberg) -- Indian banks' loan growth will slow to nil to 1% in the year started April 1, according to the Indian unit of S&P Global Ratings.
That's lower than 6.1% the previous fiscal year, which was already a multi-decade low. Corporate borrowings, which account for half of total credit, will be worst-hit and loans to individuals will decelerate to “low single digits” from “mid teens” in the past few years, Crisil Ltd. said in a report Monday.
Reeling under the worst bad-loan ratio in the world, Indian banks have turned risk-averse as the strict shelter-at-home rules have shuttered businesses and left millions jobless. Prime Minister Narendra Modi is counting on fresh credit to spur an economy hurtling toward a rare contraction.
“This crisis is unprecedented and so will its economic fallout be,” said Crisil's Senior Director Krishnan Sitaraman.
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Even before the pandemic, India's $1.7 trillion financial sector had been weakened by a festering shadow banking crisis that surfaced in 2018 and spilled over into banks and mutual funds, pushing up bad loans and eventually leading to the bailout of a private sector bank in March.
Crisil predicts loan growth will pick up to high single digits in the next financial year.
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