HSBC raises its forecast for India’s bank credit growth to 14% in FY27, driven by broadening lending across sectors, though analysts warn of moderating pace and deposit challenges ahead.
India’s bank credit growth is set to stay strong in fiscal 2027, with HSBC Global Investment Research lifting its forecast to 14% from 12% as lending momentum broadens across corporate, retail and small-business segments. The bank’s outlook comes as several lenders have reported solid loan expansion and relatively steady asset quality, reinforcing the view that credit demand remains healthy even after a strong run.
Corporate borrowing has been the clearest engine of growth. HSBC said corporate credit rose 20.4% year on year in June, up from 18.9% in May, helped by companies shifting some funding away from bond markets and towards banks, higher working-capital needs and more lending to non-banking financial companies. Overall non-food credit also quickened to 18.3% year on year in June, while retail lending, MSME credit and agricultural loans all posted solid gains, showing that the recovery is not confined to one corner of the market.
Even so, analysts expect the pace to ease later in the year. HSBC said growth could moderate in the second half of fiscal 2027 because of a high base and softer corporate demand, while other institutions see a similar pattern. Crisil expects bank credit to expand at about 13% in fiscal 2027, supported by retail and MSME lending, but notes that the benefit from policy measures rolled out in fiscal 2026 should fade over time. Icra is even more cautious, forecasting growth below 12% amid global uncertainty, higher oil prices and some pressure on asset quality in MSME and unsecured retail books.
A broader issue for lenders is that credit continues to outpace deposits. According to analysts cited by The Economic Times, bank loans in India are expected to grow faster than deposits in fiscal 2027, widening a mismatch that has persisted for more than a decade and could weigh on profitability if current account and savings account balances weaken further. That backdrop makes deposit mobilisation and liquidity management increasingly important even as near-term credit demand remains firm.
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