New Delhi, March 30
The loan growth of banking sector in the country will stay in the range of 12 to 14 per cent in the Fiscal Year 2026, according to a report by Ambit Capital.
The report expressed confidence on the easing liquidity situation as well as the easing risk weights on the unsecured retail.
"With easing liquidity and probable easing of risk weights on unsecured retail, we expect sector loan growth to stay at 12-14 per cent in FY26E," the report added.
By definition, the change in the total amount of outstanding bank loans given to both consumers and companies is measured by bank loan growth.
The loan growth in the month of february moderated for an eighth straight month, at 12 per cent, slower than 16.6 per cent a year earlier, as per the RBI data.
As highlighted by the report, the high deposit pricing and softening yields will keep margins under pressure (5- 20bps) for most lenders in FY26.
As per the report, banks with a decent share of fixed-rate loans are better placed on margins than those with a high share of variable-rate portfolios.
After witnessing a pristine trend in asset quality after Covid, there was a spike in retail NPAs caused by a surge in unsecured retail loans (personal loans/credit cards) in recent years.
"The recent consolidation in retail lending will allow banks to recognise/identify balance sheet stress by 1HFY26. Credit costs could increase YoY in FY26, but improved PCR (70 per cent) and well-built buffer provisions (0.7-1.7 per cent of loans) may provide some comfort," the report added.
The report further added that the deposit augmentation has become challenging for all lenders irrespective of balance sheet size, geographical presence or technological advancement.
The option value for deposits has been costlier; however, bankers have been deploying money into better-yield retail assets to compensate for the same, the report added.
In recent years, Indian households witnessed multiple options to save, which resulted in a gradual decline in the share of fixed deposits. The preference of urban savers has shifted towards better-yielding investment options.
In contrast, the rise of technology has paved the way for several capital market players in rural and semi-urban geographies.
Considering the improvement in penetration and the increasing diversity of various financial players, keeping momentum in deposit augmentation will remain challenging for most lenders, as per the report.
— ANI
Reader Comments
This is encouraging news! 12-14% growth shows resilience in our banking sector despite global uncertainties. The focus on retail lending needs careful monitoring though - hope RBI keeps a close watch on unsecured loans.
Interesting analysis! 🧠The shift from fixed deposits to other investment options is really changing how banks operate. I've personally moved some savings to mutual funds recently - better returns but more risk.
While the growth projection seems reasonable, I'm concerned about the rising NPAs in retail loans. Banks need to be more cautious with credit cards and personal loans. The post-Covid recovery was good, but we shouldn't get complacent.
The deposit challenge is real! My local bank manager was explaining how hard it is to attract FD customers now with so many alternatives. Hope this pushes banks to offer better services and rates to customers. 🤞
Good analysis but I wish the report had more regional breakdown. Banking trends can vary significantly between urban and rural areas. The semi-urban tech penetration point is particularly interesting - would love to see more data on that!
As someone working in fintech, I see this as validation of the changes happening in financial services! Traditional banks will need to adapt faster to compete with digital options. Exciting times ahead for Indian finance! 💰
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