ICRA expects the profitability to trend downwards in FY2026; however, the return indicators are likely to remain comfortable, leading to ICRA’s Stable outlook for the sector. ICRA expects the GST rate cuts to support consumption. This, along with surplus liquidity, would drive the credit growth of banks. Further, the gradual downward repricing of the deposit base is likely to improve the competitive positioning of banks vis-à-vis debt capital markets for the rest of the year. Additionally, the easing of the credit-to-deposit ratio and abundant liquidity in the banking system shall be supporting factors for the credit growth.

Source: ICRA Research, RBI