Crisil: Bank Credit Growth to Moderate, NPAs to Rise by FY27

• Crisil Ratings projects a marginal moderation in bank credit growth to 13% in FY27, down from 14% in FY26.
• Gross non-performing assets (NPAs) are expected to increase by up to 0.20% to 2.5% by March 2027, indicating they have bottomed out.
• Key monitorables include loans to MSMEs with West Asia exposure, micro-loans against property, and some unsecured advances.
• Sectors like ceramics and diamond polishing have already been adversely impacted by the West Asia conflict.
• Other factors to monitor are Bihar's microfinance bill and the impact of Maharashtra's loan waiver scheme on credit culture.

Key Questions Answered

How will West Asia conflict affect Indian banks?

The West Asia conflict is unlikely to directly impact Indian banks, but could indirectly affect them through increased crude oil prices, currency depreciation, and potential strain on corporate workin

What is the future outlook for bank NPAs?

Bank NPAs are expected to rise slightly to 2.5% by March 2027. Gross non-performing assets in the banking system have bottomed out.

Will deposit growth impact bank lending capacity?

Yes, deposit growth is impacting bank lending capacity as credit growth outpaces deposit growth. Banks' credit growth is around 14.5% while deposit growth is only 11.9%.