India's Bank Credit Set for Robust but Modest Growth Amid Geopolitical Risks

India's bank credit is projected to grow at 13% this fiscal, supported by strong demand from the retail and MSME sectors, albeit slightly lower than the projected 14% in FY26, as per CRISIL Ratings. Geopolitical tensions and funding dynamics are key factors influencing future credit growth.

The current fiscal year is witnessing India's bank credit growth at a robust 13%, although this is a slight deceleration compared to the 14% forecast for FY26, according to a CRISIL Ratings report. The ongoing demand from retail and MSME sectors drives this momentum.

Geopolitical developments, particularly the ongoing tensions in West Asia, are projected to be pivotal in shaping credit demand, the report notes. With corporate lending expected to grow steadily, the gap between credit and deposit growth remains a concern.

While retail loans continue to grow, inflationary pressures may curb consumer demand. Regulatory measures have aided liquidity, with banks increasingly resorting to alternative funding like certificates of deposit to counter slower deposit growth.

(With inputs from agencies.)