Credit Growth to Lift India Bank Profits Despite Likely FX Losses

Strong credit growth should have kept fourth-quarter numbers healthy at Indian banks including HDFC Bank Ltd. and ICICI Bank Ltd., though earnings may have been dented by trading losses linked to the central bank’s rupee derivatives curbs.

Data from the Reserve Bank of India shows a pickup in credit growth during the January-March quarter, aided by cuts to the key lending rate and cash reserve ratio, as well as a consumption recovery aided by cuts to the good and services tax. Although this increases banks’ credit-deposit ratios, recent messaging from the central bank indicates they have room to further expand their ratios and fund lending growth, Motilal Oswal said.