Bank credit to grow by 100-200 bps this fiscal: Crisil

Bank credit this fiscal is expected to grow 100-200 basis points (bps) to 12-13% as compared with 11-11.5% estimated for fiscal 2025, given three tailwinds, Crisil Ratings said in a report.

These include recent supportive regulatory measures, a boost to consumption from tax cuts, and softer interest rates, it added. 

Subha Sri Narayanan, Director, Crisil Ratings, said, “Credit growth in the corporate sector, which accounts for 41% of bank loans, is expected to be 9-10%, compared with 8% estimated for fiscal 2025, as lending to NBFCs, one of the largest sub-segments of corporate credit (18%2) and a key contributor to growth prior to fiscal 2025, improves with the rollback of higher risk weights.” 

“However, such growth in lending to NBFCs may still be lower than the levels seen in the past as banks will be more selective going forward,” she said.

According to Crisil, corporate credit growth will be supported by the downstream demand from the ongoing infrastructure buildout, which should continue to drive investments in the cement, primary steel and aluminium sectors.

“But for many other sectors, the ongoing tariff-related uncertainties remain monitorable. In general, companies are expected to be cautious about leverage.” it said.

While lower interest rates will benefit, the potential impact of the corporate bond market substituting bank loans for higher-rated borrowers — given the faster re-pricing there as they factor in upcoming rate cuts — will bear watching, too, it added.

Retail loans, constituting 31% of bank lending, is expected to grow 100-200 bps to 13-14% this fiscal from 12% in fiscal 2025. Home loans remain the largest constituent of retail credit (45-50%) and the improved affordability in a lower interest rate regime should support growth here, the rating agency said. 

While banks will remain cautious regarding unsecured lending, continued demand and better performance of the newer portfolio following tightened underwriting norms could lead to some pick-up in growth in the second half of fiscal 2026 off the low base, it added.