India’s bank credit growth is forecasted to accelerate to 12-13 percent in the financial year 2025-26, marking an increase of 100-200 basis points from the estimated 11.0-11.5 percent growth in the previous fiscal year, as highlighted in a report released by Crisil Ratings.
The report attributes this growth to supportive regulatory measures, increased consumer spending following tax cuts, and a more accommodative interest rate environment. Crisil Ratings Director Subha Sri Narayanan projected that credit growth in the corporate sector, which constitutes 41 percent of total bank credit, will rise to 9-10 percent in FY26 from 8 percent in FY25. This growth is anticipated to be driven by improved lending to non-banking financial companies (NBFCs) and heightened credit demand from infrastructure sectors such as cement, steel, and aluminum, despite caution from companies regarding new debt due to tariff-related uncertainties.
Key regulatory changes supporting credit growth include the Reserve Bank of India’s decision to roll back the 25 percentage points increase in risk weights for loans to certain NBFCs, effective from April 1, 2025. This measure is expected to improve credit flow to NBFCs, which experienced a decline in bank lending in FY25. Additionally, the RBI has deferred the implementation of stricter liquidity coverage ratio (LCR) norms by one year, allowing banks to allocate more funds toward credit growth rather than regulatory compliance.
Other positive factors contributing to credit growth include income tax relief measures announced in the Union Budget, along with a projected moderation in inflation. These developments are expected to bolster consumer spending. Furthermore, the RBI’s 50 basis point reduction in the repo rate since February 2025, with further rate cuts anticipated, is set to enhance credit demand.
The report emphasizes that the combination of these regulatory and economic tailwinds positions India’s banking sector for robust growth in the current fiscal year, strengthening its contribution to the nation’s economic expansion.
