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ICRA Sees Credit Growth Expansion: Eased Rules To Fuel 10.8% Growth In FY26

ICRA believes that the challenges are likely to persist in the near term, which is likely to delay the transmission of rate cuts by the RBI to banks' cost of funds. 

Rating agency ICRA expects India’s credit growth to expand at 10.8 per cent in the current financial year 2025-26.

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The repo rate cut, deferment of proposed changes in the liquidity coverage ratio (LCR) framework and additional provisions on infra projects, along with the roll-back of increased risk weights on lending to unsecured consumer credit and non-banking financial companies (NBFCs) are some of the enabling, according to ICRA.

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Besides, the durable liquidity infusion by the Reserve Bank of India (RBI) through open market operations (OMO) by way of purchases of government bonds and forex swaps with banks, would aid the liquidity and faster transmission of the ongoing cut in policy rates.

However, the persisting challenges in deposit mobilisation, high credit-deposit (CD) ratio and rising stress in the unsecured retail and small business loans would remain a drag on credit growth. Accordingly, ICRA asserted that the pace of credit expansion is expected to trail the recent highs seen in 2023-24.

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New Rules and RBI Support Help Boost Lending in Q4

Sachin Sachdeva, Vice President and Sector Head, of ICRA said: “The pro-growth regulatory stance has revived the lenders’ appetite for credit growth in Q4 FY2025 after a brief period of slow incremental credit growth in the initial period of FY2025. Accordingly, ICRA estimates the incremental credit expansion to be around Rs. 19.0-20.5 trillion, clocking a growth rate of 10.8 per cent in FY2026 compared to credit expansion of Rs. 18.0 trillion or a 10.9 per cent growth rate in FY2025.”

According to ICRA, one of the key challenges, which the banking sector has been facing in the last few years is raising deposits at competitive pricing, especially the retail deposits.

The increasing competition from other investment avenues and the investors’ preference for term deposits have led to a reduction in the share of low-cost current and savings account (CASA) balances, impacting the banks’ cost of funds.

ICRA believes that the challenges are likely to persist in the near term, which is likely to delay the transmission of rate cuts by the RBI to banks’ cost of funds. 

Also Read: What Are Tariffs And How Do They Work? Why US President Is Playing His Big ‘Trump Card’- All About The ‘Taxes’

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Shefali Singh is a skilled Senior Sub-Editor with a strong focus on general news. With years of experience in the media industry, Shefali has a sharp eye for detail and a passion for ensuring every story is accurate, engaging, and well-structured. She excels at curating news content, maintaining high editorial quality, and keeping a consistent tone on English-language websites. Shefali is also known for her ability to fact-check, edit for clarity, and perfect grammar, helping digital platforms thrive. She holds a Bachelor's degree in Journalism and Mass Communication from IP University. Shefali’s expertise in SEO ensures that stories reach the right audience at the right time, maximizing their impact. Previously, Shefali worked with top English news platforms like ANI and All India Radio, covering a wide range of topics from current affairs to human interest stories. She has also interviewed key figures from the UP community, such as actor Faisal Malik, politician Malook Nagar, and media personality Nithari Kand. Key Articles & Features: https://news24online.com/business/tcs-faces-biggest-loss-of-rs-53185-crore-what-it-means-for-ratan-tatas-employees-details-inside/484838/ https://news24online.com/india/who-is-agrata-sharma-kumar-vishwas-daughter-making-business-strides-starting-a-new-chapter-in-life/494916/ https://news24online.com/business/jiohotstar-hits-100-million-paid-subscribers-after-disney-reliance-merger/515384/ Achievements & Recognitions: Fact-Checking Excellence: Dedicated to meticulous fact-checking in collaboration with the news desk team to ensure content reliability and accuracy. SEO Mastery: Expertise in optimizing digital content for better reach and engagement. Numerous articles written by Shefali have been featured on Google Discover. Contact: 📧 Email: [email protected]

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First published on: Apr 08, 2025 05:11 PM IST


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