• UGI USER
  • May 29, 2024
  • 17 Likes
  • 1 Comments

CREDIT GROWTH TO SLOW TO 14% DUE TO RISK WEIGHTS, GDP

Why in the news?

  • Bank credit growth in FY25 is projected to slow to 14% from 16% in FY24.
  • The slowdown is attributed to a high base effect, revised risk weights, and a deceleration in GDP growth, according to CRISIL Ratings.
source:medium

About Credit Growth:

  • Credit growth is the expansion of loans to individuals or organizations, maintaining economic liquidity.
  • It grows rapidly due to:Financial deepening,Normal cyclical upturns,Excessive cyclical movement.
  • A credit rating assesses a borrower’s creditworthiness.
  • It applies to individuals, corporations, states, provinces, and sovereign governments.
  • Evaluates general creditworthiness or specific debt obligations.
  • Credit Rating Agencies (CRAs) assess a debtor’s ability to repay debt.
  • SEBI-registered agencies: CRISIL, ICRA, CARE, SMERA, Fitch India, Brickwork Ratings.
What is a credit rating?

  • A credit rating is a 3-digit number representing a borrower’s creditworthiness.
  • It assesses risks related to granting financial instruments to individuals or businesses.
  • Based on past transactions, liabilities, and assets.

What is CRISIL’s rating?

  • CRISIL’s rating scale evaluates credit risk.
  • It assesses the likelihood of timely debt servicing.
  • The scale covers various debt instruments, including equity-linked debentures.
  • Non-credit risks like market risks are also considered.

About Credit Rating Information Services of India Limited(CRISIL):

  • CRISIL, India’s oldest credit rating agency, launched in 1987, public in 1993.
  • Headquartered in Mumbai, completed 30 years in 2017.
  • Ventures: infrastructure rating (2016), acquired 8.9% stake in CARE (2017).
  • Portfolio: mutual fund rankings, ULIP, CRISIL coalition index.

Associated Article:

https://universalinstitutions.com/rbi-actions-to-restrict-credit-growth/