Banks’ loans to grow at 12-13 per cent in FY26: Rating agencies

Banks’ loans could grow at a pace of 12-13 per cent in FY26 with pick up seen across loan segments, analysts at rating agencies said.

“For banks, advances are likely to grow 12-13% in fiscal 2026, with a pick-up across segments. Asset quality should also be stable with gross non-performing assets ratio of ~2.4% expected as on March 31, 2026, in line with fiscal 2025,” said CrisilL Ratings in a webinar on Tuesday.

India Ratings & Research, meanwhile, said the banking system credit growth could be at 13-13.5 per cent in FY26, considering possible impact from the Reserve Bank of India’s (RBI) advisory on risk weight assets in the unsecured retail segment, and slowing of credit extended to NBFCs.

Non-food credit growth

According to RBI data, banks’ non-food credit growth moderated to 12 per cent in February, on account of slowdown in unsecured personal loans and credit card loans.

CareEdge Ratings, in a webinar on Tuesday, said the banking, financial services, and insurance (BFSI) sector experienced a sharp moderation in its credit ratio, declining from 2.75 in H1FY25 to 1.07 in H2FY25, reflecting emerging stress in select lending segments.

While the sector remains fundamentally strong, challenges in asset quality and profitability have affected certain areas. Sanjay Agarwal, Senior Director at CareEdge Ratings, said the credit ratio decline is due to pressures in the microfinance and unsecured business loan segments.

“The increase in loan sizes, coupled with rising debt levels per borrower, has heightened the financial strain on MFI borrowers, leading to asset quality concerns for NBFCs in this space. Consequently, NBFCs catering to microfinance and unsecured business loans are expected to witness elevated credit costs at least until H1FY26,” he said.

Despite these headwinds, the overall credit outlook for the BFSI sector remains stable, he said, supported by healthy capitalisation levels among NBFCs and banks.

NBFCs

Crisil Ratings said for non-banks, assets under management are expected to grow 15-17 per cent in fiscal 2026, in line with fiscal 2025. This remains higher than the decadal average growth rate of 14 per cent seen between fiscals 2016 and 2025. The ability to diversify funding profile and revival in bank funding following the rollback of higher risk weights on bank lending to non-banks will be the key.

India Ratings says rating upgrades mainly occurred in NBFC sector, aided by substantial equity infusion or expansion of franchisee while maintaining asset quality. Consolidation in the industry with stronger player acquiring a relatively weaker credit profile entity operating in the same segment was the other key upgrade driver.