The credit growth for the banking sector is expected to pick up to 12-13% in the second half of the current financial year, India Ratings and Research (Ind-Ra) said on Tuesday.
The rating agency continues to remain watchful on the evolving tariff situation. “If it materialises into something bigger, it will have an impact on the credit growth,” Karan Gupta, head and director – financial institutions at India Ratings, said.
India Ratings and Research projects corporate credit growth at 11%
The rating agency expects the corporate credit growth at 11% in the second half of the current financial year. This does not take into account the impact of tariffs. Services and retail have become the prime drivers of loan growth, the agency said. It expects a revival in lending to non-bank lenders and the retail sector, in addition to lower yield curve supporting corporate disbursements.
India Ratings and Research expects the profitability of banks to slightly moderate in FY26. Net interest margins could see a recovery as deposit rate cuts would partially ease the pressure, it said.
“The RBI’s shift in the policy stance and liquidity infusions of Rs 5.6 lakh crore (2% of system assets) have supported surplus liquidity in the system, while gradual CRR cut to 3% starting September 2025 from 4% is expected to further inject Rs 2.5 lakh crore, aiding the NIM recovery in 2HFY26,” the rating agency said.
Credit costs are expected to stay below 1% with ROAs moderating slightly to 1.33% in FY26, from 1.38% in FY25.
NBGC growth to decline
On the NBFC segment, the rating agency expects assets under management to moderate to 18.5% due to reduced funding from banks, cautious lending approach by NBFCs due to asset quality concerns and high base effect of previous years’ elevated growth levels.
Ind-Ra has maintained the ‘neutral’ outlook on both banks and non-bank lenders.