With recent recap plans in play, the credit system is likely to grow to 12-15 percent during the time period under review.
If a report by brokerage firm Ambit Capital is anything to go by, the government's recapitalisation plan for public sector banks should drive credit growth by up to 700 basis points to 15 per cent, and as a result, GDP growth is expected to touch 7 per cent in FY2019.
Notably, the government recently unveiled a Rs 2.1 lakh crore recapitalisation package for public sector lenders. The capital infusion will be funded through three sources -- Rs 18,139 crore from budgetary provisions, Rs 58,000 crore from the market as the government dilutes its stake and Rs 1.35 lakh crore through recapitalisation bonds issued by the government.
The report added that lending growth at across banking system was calculated to be at 8 percent in 2018-19. With recent recap plans in play, the credit system is likely to grow to 12-15 percent during the time period under review.
"This in turn is likely to improve prospects of growth for the industrial sector as well as the services sector, thereby propelling headline GDP growth to 7 percent year-on- year in FY19 from 5.8 percent in FY18," the report said.