India's bank credit is projected to grow by 12–13% in the fiscal year 2025–26 (FY26), up from an estimated 11–11.5% in FY25. This growth is attributed to supportive regulatory measures, tax incentives, and a favorable interest rate environment.

Key Drivers of Credit Growth:

Regulatory Support: The Reserve Bank of India (RBI) has rolled back the 25-basis point increase in risk weights for loans to certain non-banking financial companies (NBFCs), effective April 1, 2025. This move is expected to enhance credit flow to NBFCs, which had experienced a slowdown in bank lending in FY25. 

Tax Incentives and Interest Rates: Recent tax cuts and a softer interest rate regime are anticipated to boost consumption and improve affordability, particularly in the retail credit segment. ?

Sectoral Outlook:  Corporate Credit: Expected to grow by 9–10% in FY26, up from 8% in FY25. This growth will be driven by increased disbursements to NBFCs and demand from infrastructure sectors such as cement, steel, and aluminum. ?

Retail Credit: Projected to rise by 13–14%, supported by improved affordability and a lower interest rate environment, especially in the mortgage loan segment. 
Small Business and Agriculture Loans: Expected to witness steady growth at 16–17% and 11–12%, respectively. ?

Considerations:

While the outlook for credit growth is positive, deposit growth remains a critical factor to monitor. The ability of banks to attract deposits will be essential to sustain the projected credit expansion. 

In summary, India's banking sector is poised for robust credit growth in FY26, supported by favorable policies and economic conditions. Continued attention to deposit growth and prudent lending practices will be key to maintaining this momentum.