More Stories

Informist, Wednesday, Oct. 8, 2025

 

Please click here to read all liners published on this story

--S&P: Indian banks poised for growth amid global uncertainty 
--S&P: Indian bks well-positioned to navigate tariffs, rate cuts, weak rupee 
--S&P: See Indian bks new NPA formation at 1.7%-1.8% over next 2 years 
--S&P: See Indian banks new NPA formation at 1.7%-1.8% on retail slippages 
--S&P: See Indian banks' credit growth at 11.5-12.5% over FY26, FY27 
--S&P: Expect Indian banking sector credit growth to revive from H2 FY26 
--S&P: Expect Indian banking sector credit growth to revive on tax cuts

 

NEW DELHI – Credit growth in India's banking sector is expected to pick up pace from the second half of the current financial year on the back of rationalisation in the goods and services tax rates, income tax breaks, and potential regulatory easing, S&P Global Ratings said Wednesday.

 

The rating agency projects credit growth to rise to 11.5% by March, compared with 11.0% growth at the end of FY25. Credit growth is seen at 12.5% at the end of FY27 and FY28, the rating agency said in a report. 

 

"Notwithstanding global uncertainty and cautious lending, we forecast credit growth of 11.5-12.5% over fiscal years 2026 and 2027 (year ending Mar. 31), despite subdued demand and tighter underwriting," S&P said. "Indian banks are well-positioned to navigate global uncertainty, tariffs, rate cuts, and a weakening rupee."

 

Indian banks are seen supported by low exposure to sectors hit by US tariffs, deleveraging by companies, and a focus on secured retail lending, S&P said.

 

S&P expects asset quality of Indian banks to worsen and credit costs to rise to 80-90 basis points over the next two years, the rating agency said. "We anticipate credit costs will rise as the tailwinds from sharp recoveries fade and due to stress in segments such as unsecured retail, SME (small and mid-size enterprises) loans under INR 1 million, and microfinance."

 

According to S&P, new non-performing asset formation in corporate lending will average 1.1% per year over the next two years. However, the overall rate of new NPA formation will be higher at 1.7-1.8?cause of more slippages in the small and mid-size enterprises, and retail segments, the rating agency said. 

 

"A sharp credit revival--though we don't expect one in the next two years--would stretch banks' funding profiles and force them to rely on alternative funding sources. Cuts to the cash reserve ratio offer relief. While Indian banks' loan-to-deposit ratios are competitive regionally, India's reserve requirements exceed those of many peers," S&P Credit Analyst Geeta Chugh said in a release. "We expect earnings to moderate but remain above long-term averages."

 

Indian banks' capacity to finance private investment may be constrained as investors increasingly shift their savings toward mutual funds, equities, and real estate, S&P said. With deposits under pressure, banks are likely to rely more on wholesale domestic and international debt for funding, the rating agency said.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.