Bank credit demand has rebounded sharply in the first half of 2025-26, buoyed by GST rate cuts and strong festive demand, prompting credit rating agency Icra to raise its full-year credit growth projection.

Outstanding bank credit stood at ₹182.43 lakh crore as of March 21, 2025, and rose by around ₹10.1 lakh crore to ₹192.61 lakh crore by October 3, 2025. Notably, nearly 60 per cent of this increase came between August 22 and October 3, reflecting a surge in festival-linked lending.

“The first half of FY26 has seen incremental credit offtake of ₹10.1 trillion (lakh crore), with a sizeable expansion in September 2025. This has prompted us to revise our full-year credit growth projection,” said Sachin Sachdeva, vice-president and sector head, Icra.

The agency now expects credit growth for FY26 to range between 10.7 and 11.5 per cent, up from its earlier forecast of 10.4–11.3 per cent.

“This robust offtake in the first half is driven by partial upfronting of demand from the third quarter to the second quarter of FY26, given the early onset of the festive season, supported by GST cuts. As a result, the incremental credit offtake in the second half is seen flattish relative to the level in the first half and around 9 per cent higher than the second half of FY25,” said Sachdeva.

The credit growth is primarily driven by the retail and MSME segments, while corporate demand is yet to see a major pickup. As a result, Icra said that overall asset quality remains monitorable amid higher unsecured retail and MSME advances.

“Gross NPAs are forecasted to rise slightly in FY26, but stay within the comfortable range (2.1-2.3 per cent),” Icra said in a statement.

From a regulatory measure perspective, Icra said the transition to the expected credit loss (ECL) system of provisioning over a 5-year period is unlikely to be detrimental for lenders, with the impact on core capital levels to be less than 1.5 per cent.

“Banks are well-positioned to absorb the impact of the changes related to capital charge for credit risk and ECL with resilient capital buffers,” Sachdeva said.