ICRA Forecasts Slower Bank Credit Growth In India In H2 FY27 As Higher Policy Rates Weigh On Loan Demand

Credit growth in India is likely to slow during the second half of FY27, according to ICRA. Higher policy rates are expected to weigh on consumption demand. A higher base could also contribute to a slower growth rate.

ICRA expects bank credit growth to fall to 15–16% for the full financial year 2026–27, compared with the current rate of 18–19%. The agency has not issued a specific credit growth forecast for FY28.

Bank Asset Quality May Weaken As Fresh Slippages Rise

ICRA expects a slight deterioration in banks’ asset quality as lending continues to expand. Fresh slippages at public sector banks are projected to reach around ₹1 lakh crore in FY27, up from ₹90,000 crore in FY26.

Private sector banks could report fresh slippages of ₹1.3 lakh crore during FY27. The figures indicate that lenders may face some pressure on asset quality even as credit growth moderates.

At the same time, banks’ net interest margins (NIMs) are expected to improve as the Reserve Bank of India’s rate-hiking cycle progresses.

Impact On Listed Indian Banks

The outlook covers both public and private sector lenders listed on Indian stock exchanges, including State Bank of India, Bank of Baroda, HDFC Bank and ICICI Bank. The projected rise in fresh slippages is relevant to investors monitoring banks’ asset quality, while the expected improvement in NIMs is another factor to watch.

The overall performance of listed banks will depend on how credit growth, fresh loan slippages and net interest margins develop during FY27.

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