Domestic Bank Credit Growth In India May Ease To 15% By March 2027 From 18% As Base Resets: Jefferies

New Delhi, Sep 9 (KNN) Domestic bank credit growth in India could moderate to 15 per cent by March 2027 from around 18 per cent currently as a higher base from December weighs on growth, while banks may see stronger expansion through their overseas operations, Jefferies said in a report.

The brokerage noted that system credit growth has remained robust, supported by stronger credit demand and banks gaining market share from bonds and external commercial borrowings (ECBs). 

“We expect sector domestic credit growth to moderate from 18 per cent now to 15 per cent by Mar-27 as base resets in Dec-26,” it said, ANI reported.

Overseas Operations May Support Growth

Jefferies said banks’ overall credit growth could improve by 3-4 percentage points as foreign branches provide additional leverage.

Deposit growth could also rise to 17 per cent as the full impact of recent foreign-currency inflows feeds through, before moderating to 15-16 per cent by March 2027, the report said.

System deposit growth stood at 15 per cent year-on-year (YoY) as of August 14, up from 13 per cent in June.

Corporate Loans Lead Credit Expansion

Corporate lending remained the main driver of bank credit growth. Corporate credit expanded 22 per cent YoY in July, compared with 16 per cent for retail loans and 17 per cent for agriculture.

Within corporate lending, loans to NBFCs and engineering grew 36 per cent each, while credit to petroleum and gems and jewellery increased 34 per cent and 36 per cent, respectively.

Overall bank credit growth stood at 19 per cent in July.

Jefferies expects credit expansion to remain strong in the near term, with domestic growth moderating as the comparison base resets, partly offset by greater use of banks’ foreign branches.

(KNN Bureau)