Credit growth picked up towards the end of H1 FY2026 and remained strong thereafter, supported by goods and services tax (GST) rationalisation and liquidity infusion through cash reserve ratio (CRR) cuts. Additionally, the shift in the reporting date to the 15th and month-end from alternate Fridays had inflated the reported credit offtake in Q3 FY2026. Accordingly, incremental credit growth in 9M FY2026 rose sharply to Rs. 20.3 trillion from Rs. 11.6 trillion in 9M FY2025; on a comparable basis (pre-reporting change), incremental credit stood at Rs. 12.4 trillion in 8M FY2026 versus Rs. 10.5 trillion in 8M FY2025. ICRA expects growth to stay robust with retail and micro, small and medium enterprises (MSMEs) as the key growth drivers. Factoring in the reporting date change, ICRA has raised its FY2026 credit offtake estimate to Rs. 25.0-26.0 trillion {13.7-14.3% year-on-year (YoY)} from Rs. 19.5-21.0 trillion (10.7-11.5%) earlier, while FY2027 credit expansion is estimated at Rs. 23.5-25.0 trillion (11.3-12.0%). The estimated credit growth in FY2027 would be higher than FY2026 in the absence of changes in the reporting fortnight w.e.f. December 15, 2025.

However, the ongoing West Asia conflict has introduced uncertainties, particularly for MSMEs, due to potential oil shocks, supply chain disruptions, and inflationary pressure. Moreover, the cost of funds is expected to stay high amid uncertainties, which would further delay the anticipated recovery in net interest margins (NIMs) and put pressure on the profitability. Prolonged disruptions may affect borrower cash flows as well, posing asset quality risks. ICRA also remains watchful of the lag in deposit growth, declining liquidity coverage ratios (LCRs), and MSME asset quality. Nevertheless, return indicators are expected to remain steady in FY2027, supported by a likely improvement in NIMs, enhanced operating efficiency, and contained credit costs.

• The YoY credit growth was healthy at 15.2% as on February 28, 2026 compared to the 11.0% growth as on February 23, 2025 (10.9% as on March 21, 2025) while the YoY deposit growth stood at 13.0% as on the same date (10.3% year ago as well as on March 21, 2025).
• The headline asset quality metrics improved further with the gross non-performing advances (GNPAs) and net NPAs (NNPAs) at 1.9% and 0.4%, respectively, as on December 31, 2025 (2.2% and 0.5%, respectively, as on March 31, 2025).

Source: RBI, ICRA Research; FY24* onwards represents outstanding and incremental credit, including the impact of the HDFC merger; ^H1 FY26 represents period up to October 3, 2025