ICRA Projects Bank and NBFC Credit Growth in FY2026

On 10th September 2025, credit rating agency ICRA released its outlook for FY2026, projecting strong growth in incremental credit flows for banks and non-banking financial companies (NBFCs), supported by GST rate cuts, liquidity measures, and easing deposit costs.

Key Points

Bank Credit Growth: Incremental credit flow of banks is expected to rise to ₹19–20.5 lakh crore in FY2026, up from ₹18 lakh crore in FY2025, reflecting a YoY growth of 10.4–11.3%, compared to 10.9% last year.
NBFC Credit Expansion: NBFCs (excluding infrastructure-focused entities) are projected to expand credit by 15–17% in FY2026, slightly lower than the 17% recorded in FY2025.
Policy Support: GST rate cuts and the upcoming CRR cut are expected to boost domestic demand and support higher credit growth for both banks and NBFCs.
Cost of Funds: Gradual downward repricing of deposits will improve the competitiveness of banks against debt capital markets, while abundant liquidity and easing credit-to-deposit ratio will further support lending.
Asset Quality Challenges: Stress in the retail and MSME segments slowed growth for private sector banks and NBFCs. However, ICRA expects improved appetite post-GST cuts, aiding recovery.
Macroeconomic Impact: While lenders may not face direct first-order shocks, their borrowers—such as transport operators in export-dependent sectors (e.g., apparel) and employees in vulnerable industries—may face income shocks affecting loan repayment.