Indian Banks Raise Credit Growth Forecasts Following GST Rate Cuts

Indian banks have raised their credit growth forecasts for the current financial year, driven by the government’s recent GST rate cuts and improved domestic demand. The State Bank of India (SBI), the country's largest lender, now expects credit growth of 12-14% for FY26, an increase from its earlier projection of 11-12%, citing a surge in consumption from tax and interest rate cuts.

According to a report by ICRA released in early September, banks in India are projected to achieve credit growth of 10.4-11.3% in FY26, with non-banking financial companies (NBFCs) expected to grow their credit at 15-17% this year. The report highlighted that GST rationalisation along with the upcoming Cash Reserve Ratio (CRR) cut would support credit expansion banks and NBFCs in the near term.

Several banks have reported a pick-up in retail credit demand since the GST rate reductions took effect in late September. Punjab National Bank (PNB) noted strong traction in vehicle and housing loans, with expectations of further growth in retail credit in the third quarter of FY26. ICICI Bank mentioned a slowdown in credit growth before the GST cuts but noted a rapid momentum gain after their implementation.

Vehicle loan growth, which slowed in the first half of FY26, has shown signs of revival post-GST cuts and festive demand, with banks optimistic about achieving double-digit growth in vehicle financing portfolios in the second half of the year.

The improvements in credit growth appear largely led by retail segments, along with better demand from micro, small and medium enterprises (MSMEs) and agriculture-related sectors. Despite some caution in corporate credit demand, the overall outlook is positive for credit expansion supported by favourable tax and monetary policies.

These developments indicate a growing confidence in credit markets as a result of GST rate cuts aimed at boosting consumption and demand across various sectors of the economy.