The beginning of FY2026 witnessed slow credit offtake as the banks remained cautious towards the retail sector and nonbanking financial companies (NBFCs), and the corporates preferred bond markets given the low yields. Nevertheless, bank credit picked up by end of H1 FY2026 and the trend continued thereafter, resulting in YoY credit growth of 11.4% as on November 28, 2025. Measures like goods and services tax (GST) rationalisation and liquidity boost via cash reserve ratio (CRR) cuts helped the sector achieve a healthy credit growth trajectory till November 2025. Factoring in the same, ICRA had recently revised its credit growth estimate for FY2026 upwards to Rs. 19.5-21.0 trillion (10.7–11.5%) from its earlier estimate of Rs. 19.0-20.5 trillion (10.4-11.3%). Going ahead as well, ICRA anticipates the credit growth to continue at a healthy pace with retail and micro, small and medium enterprises (MSMEs) as major growth drivers. In addition, private sector banks (PVBs) are likely to re-focus on growth after having reduced the credit–deposit (CD) ratio so far. Accordingly, ICRA estimates credit expansion of Rs. 23.50-25.00 trillion (11.7-12.3%) in FY2027.

Exhibit: Trend in non-food bank credit and its constituents

Source: ICRA Research, RBI