CRISIL Ratings: Bank Credit in India Will Grow by 12–13% in FY26

India’s bank credit is expected to grow by 12–13% in FY26, slightly higher than the 11–11.5% growth seen in FY25. According to Crisil Ratings, this will be driven by new regulatory changes and expected tax cuts that could boost spending. Lower interest rates will also play a role.

3 Factors Supporting the Growth of Bank Credit

CRISIL said that 3 main factors would help drive this credit growth:

• Higher consumer spending due to likely tax cuts
• Regulatory relief from the Reserve Bank of India (RBI)
• Lower interest rates, making loans cheaper

Moreover, 2 major regulatory decisions will free up more money for banks to lend. First, the Reserve Bank of India (RBI) has rolled back the earlier increase in risk weights on loans to non-banking financial companies (NBFCs), making it easier and less capital-intensive for banks to lend to them.

Second, the implementation of stricter liquidity coverage ratio (LCR) norms has been delayed by a year, which means banks can now use funds that would otherwise have been set aside as a safety buffer, thereby increasing their lending capacity.

Better Bank Credit Flow to NBFCs

The RBI had earlier raised the risk weight on loans to NBFCs, making it harder for banks to lend to them. But from April 1, 2025, this decision was reversed. This will make lending to NBFCs easier.

In the past, loans to NBFCs grew at 21% annually (FY23–FY24). However, in FY25, this growth dropped to 6% by February. Now, lending to NBFCs is expected to grow in double digits, though not back to the previous high levels.

Corporate Bank Credit to Pick Up

Loans to the corporate sector, which makes up about 41% of total bank loans, are expected to grow at 9–10% in FY26, compared to 8% in FY25. Lending to NBFCs is a key part of corporate lending (about 18%) and was a big growth driver before FY25.

Deposit Growth Still a Concern

While bank credit is set to grow faster, deposit growth needs attention. In FY25, deposits grew at 10.3%, which may not be enough to fully support rising credit demand.

Conclusion

Crisil Ratings believes India’s credit growth will improve in FY26 due to helpful regulations and better spending by consumers. But deposit growth needs to keep pace for long-term stability.

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