Indian banks project non‑food credit to rise 12% YoY in July‑Dec 2026, while deposit growth falls behind at 4%—a gap that could dampen future lending appetite.
Nearly three‑quarters of the 22 banks surveyed expect non‑food credit to grow at a mid‑teens pace or higher; 78% foresee double‑digit growth in retail and SME segments, with 70% of respondents targeting at least 10% expansion.
Deposit mobilisation remains the biggest constraint: 66% of banks flag slower deposit growth relative to credit demand, a concern especially acute for public‑sector banks. The lag is projected to widen from 2.8% in Q2 to 4.0% by Q4.
Geopolitical uncertainties also loom large—about 60% cite supply‑chain disruptions and global economic volatility as the top impediments to private‑sector capex, while 55% fear a weak demand outlook could stall the recovery.
Banks’ FY27 priorities shift toward tightening liability franchises: deposit mobilisation tops the agenda for private banks, while public banks push AI‑led transformation. The Emergency Credit Line Guarantee Scheme 5.0 is viewed as the most potent catalyst for credit expansion.
Going forward, banks are poised to tighten net‑interest margins in response to rising deposit rates, while seeking to leverage technology to offset the deposit shortfall. Investors will watch how these dynamics play out in the next earnings cycle and FY27 guidance.