Crisil pegs FY26 bank credit growth at 12%

PTI mumbai

Domestic credit rating agency Crisil on Monday said banks' credit growth will accelerate in the second half of the fiscal year and inch up to 12 per cent in FY26. Retail credit will drive growth in loan books for banks in FY26, and corporate loans growth will be slower in the fiscal year, the agency said.

The agency flagged some concerns for the industry, including a decline in households' contribution to deposit accretion, which can lead to issues over deposit stability, and lending to small businesses, which can impact asset quality.

"The Q1 credit growth was slower at 9.5 per cent and while it has inched up to 10 per cent, it is still subdued. However, we expect the second half to lead to faster loan growth, which should take FY26 loan growth to 11-12 per cent," Crisil Chief Rating Officer Krishnan Sitaraman told reporters.

He said government and regulatory measures, coupled with a likely reversal of an earlier trend of corporate borrowers going to alternatives like bond markets will help banks' credit growth. He said the transmission of the RBI's rate actions into the marginal cost of funding-based lending rate is still catching up with 1 percentage point reduction while rates in bond markets move even before the RBI announces its calls.

As the banks' rate offerings go lower, demand will shift to bank loans, he said. Private capex demand growth, however, may take some time to revive as companies are likely to opt for settling of the global uncertainties before making big investment decisions, he said.