Banks’ credit growth to moderate in FY27; NPAs to inch up: Crisil Ratings

MUMBAI, Apr 1 — Domestic rating agency Crisil Ratings on Wednesday projected a slight moderation in bank credit growth for FY27, along with a gradual rise in asset quality stress, amid uncertainties stemming from the ongoing West Asia conflict. The agency estimates that the banking sector will record credit growth of around 13% in the financial year 2026–27, a marginal decline from the 14% growth expected in FY26. The moderation reflects cautious lending trends as geopolitical tensions and global economic uncertainties weigh on business sentiment.Krishnan Sitaraman noted that while overall growth remains stable, certain segments could face heightened risks. He highlighted that loans to micro, small and medium enterprises (MSMEs) with exposure to West Asia—either through export markets or raw material sourcing—will require close monitoring.Crisil also indicated that the gross non-performing assets (NPAs) of the banking system may have reached their lowest levels and could rise slightly going forward. The agency expects NPAs to increase by up to 0.20 percentage points, reaching around 2.5% by March 2027. Additionally, stress may emerge in micro-loans against property and select unsecured lending segments. Despite these concerns, the overall outlook for the banking sector remains stable, supported by adequate capital buffers and improved risk management practices across institutions.