Banks Record 11.3% Loan Growth Amid Retail, MSME Lending Boom

According to the report from CareEdge Ratings, credit growth revived across retail and MSME segments, though margins were constrained by faster lending rate transmission and slower deposit repricing.

Among SCBs, public sector banks recorded stronger growth of 14.5 per cent YoY in advances, while private sector banks registered a comparatively moderate rise of 9.4 per cent YoY.

Meanwhile, deposits increased by 11 per cent at public sector banks and 10 per cent at private banks. The CASA ratio declined to 37.4 per cent from 38.5 per cent a year earlier, as term deposits rose approximately 12 per cent.

In Q2 FY26, banks reported stable performance with mild NIM pressure amid steady loan growth, supported by festive driven auto demand, GST rate cuts, and elevated bond yields, pushing the CD ratio to 85.2 per cent, the report noted.

SCBs' weighted average lending rate (WALR) stood at 9.32 per cent versus an 8.80 per cent average yield, reflecting quicker loan repricing post-rate cuts, the ratings agency said.

CareEdge Ratings projected that the loan demand is expected to strengthen in Q3FY26, aided by festive spending, GST benefits, and rising credit card and consumer durable-linked products.

The net interest margin for SCBs reduced by 21 bps to 3.13 per cent during the quarter on a YoY basis, the report noted.

The ratings agency attributed this dip to the faster transmission of lending rate cuts compared to the slower adjustment in deposit rates and subdued credit growth in higher-yielding segments such personal and microfinance loans.

- IANS