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Indian banking sector outlook brightens as robust credit growth: Report
🇴🇲 Oman /Economy & Trade

Indian banking sector outlook brightens as robust credit growth: Report

From Times of Oman · () English

Summarized and contextualized by DistantNews.

At a glance

News Documents & data Context piece
  • Indian banks are poised for sustained earnings growth in FY27, driven by strong credit demand and improved deposit mobilization.
  • Robust loan growth, potential monetary policy support, and benign asset quality are key factors contributing to the positive outlook.
  • Key monitorables include deposit costs, MSME asset quality, and the ability of banks to sustain deposit mobilization.

India's banking sector is entering fiscal year 2027 with a strong outlook, characterized by robust credit demand, improving deposit mobilization, and stable asset quality, according to a report by Ashika Institutional Equities.

Banking system's non-food credit growth and deposit growth improved to 18.6 per cent YoY and 13.3 per cent YoY, respectively, as on June 30, 2026.

— Ashika Institutional Equities reportThe report highlights the significant year-on-year growth in credit and deposit mobilization as of June 30, 2026.

The sector is expected to benefit from broad-based loan growth across various segments, including secured retail, MSME, services, and corporate clients. The report projects system credit growth to remain healthy at approximately 15% in FY27. Additionally, inflows from the special FCNR(B) deposit window are anticipated to provide a significant source of funding, potentially contributing around 1.8% to system deposit growth by September 2026.

System credit growth is expected to be at ~15 per cent in FY27.

— Ashika Institutional Equities reportThe brokerage firm's projection for system credit growth in the upcoming fiscal year.

Asset quality remains a key strength, with the Gross Non-Performing Asset (GNPA) ratio for Scheduled Commercial Banks standing at a multi-decadal low of 1.8% as of March 2026. Strong provision coverage and low credit costs are expected to support profitability. However, the report identifies rising stress in the MSME segment as a key area to monitor.

GNPA of Scheduled Commercial Banks (SCB) stood at 1.8 per cent in March 2026, a multi-decadal low, with NNPA at 0.4 per cent.

— Ashika Institutional Equities reportThe report details the strong asset quality metrics for Indian banks as of March 2026.

Potential monetary policy support, including a possible repo rate hike by the Reserve Bank of India in the second half of FY27, could further benefit banks with a higher proportion of external benchmark-linked loans. The RBI's FCNR(B) zero-cost swap window is also seen as a positive factor, offering access to lower-cost funding and easing deposit mobilization pressures. Banks demonstrating strong deposit franchises, healthy capital positions, and resilient asset quality are likely to outperform.

Ability to sustain deposit mobilization, protect CASA franchises, and manage incremental cost of funds (CoF) will remain key differentiators.

— Ashika Institutional Equities reportThe report identifies crucial factors for banks to maintain their competitive edge.
DistantNews Editorial

Originally published by Times of Oman. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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