India's Credit Growth Reaches 13.8% Amid Economic Uncertainty: New Report
Synopsis
India's credit growth has surged to 13.8%, spurred by liquidity and consumer recovery post-GST cuts. This report unveils the potential for banks to enhance their credit-to-deposit ratios amid ongoing economic challenges.
Key Takeaways
Systemic credit growth in India reaches 13.8% Growth supported by liquidity and consumer spending recovery Stable deposit growth at 10.8% Challenges in mobilizing low-cost deposits persist Future credit growth projected at 13.5% YoY in FY27E
New Delhi, April 2 (NationPress) The systemic credit growth in India has reached 13.8% as of March 15, driven by liquidity reserves and a recovery in consumer spending following GST reductions, according to a report released on Thursday.
The analysis by Motilal Oswal Financial Services indicates that banks possess the capacity to enhance their credit-to-deposit (CD) ratios further, as the deposit growth holds steady at 10.8% while the CD ratio has risen to 83% due to increased credit expansion.
"Given the intense competition for deposits, banks are encountering hurdles in attracting low-cost deposits. We anticipate that the rates for term deposits will remain stable due to the ongoing challenges in mobilizing affordable deposits," the report forecasts.
The brokerage identified ongoing advantages from the cash reserve ratio reduction and the Reserve Bank of India’s backing of the LCR-NSFR framework, which is aiding in the growth of CD ratios, particularly benefiting public sector banks.
The forecast suggests that systemic credit growth will maintain approximately 13.5% year-on-year in FY27E, accompanied by a robust deposit growth of 11.5%.
Net interest margins are projected to remain stable, with medium-sized banks positioned favorably for margin growth.
"The recent repo rate cut of 25 basis points on December 25 is anticipated to be fully reflected in lending yields by Q4. As a result, funding costs are expected to remain high, and many banks have not adjusted their TD/SA rates following the latest rate cut," the report stated.
Some major private banks may experience stagnant margins in their Q4 results. The quality of assets has been generally stable; however, the report cautioned that the ongoing conflict in the Middle East has introduced risks related to cash flow and input costs for MSMEs, potentially leading to stress within this segment.
Concerning asset quality in private banks, the report highlighted that sectors such as business loans and commercial vehicles require close scrutiny amid the Middle East situation, although the immediate impact seems limited.
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Point of View
This report highlights a critical moment for India's banking sector. While credit growth is promising, the challenges in low-cost deposit mobilization reveal the need for cautious optimism. A balanced approach will be essential to navigating these economic uncertainties.
NationPress
5 Aug 2026
Frequently Asked Questions
What is the current credit growth rate in India?
As of March 15, India's systemic credit growth stands at 13.8%.
What factors are driving this credit growth?
The growth is supported by liquidity buffers and a recovery in consumption following GST cuts.
How are banks positioned in terms of credit-to-deposit ratios?
Banks have room to enhance their credit-to-deposit ratios as deposit growth remains stable.
What challenges are banks facing?
Intense competition for deposits is making it difficult for banks to mobilize low-cost deposits.
What is the forecast for future credit growth?
The report projects systemic credit growth to remain around 13.5% year-on-year in FY27E.
