New Delhi [India], January 2 : Credit growth in the country is expected to remain at around 12 per cent year-on-year in FY26 and improve to nearly 13 per cent in FY27, while deposit growth is likely to stay steady at about 10 per cent year-on-year in FY26, according to a report by Motilal Oswal Financial Services.
The report said that system credit growth has started showing early signs of revival. As of December 12, 2025, system credit growth improved to 11.7 per cent year-on-year, with year-to-date growth at 7.7 per cent. This marks a recovery from the low of 8.9 per cent recorded in May 2025.
It stated "Credit growth gaining traction; margin trajectory mixed... Deposit growth stable at 9.7 per cent".
The report highlighted that growth momentum has strengthened over the past few months and has remained above 10 per cent since July 2025.
According to the report, the credit cycle has seen a meaningful pickup following GST cuts, with system credit growth tracking above 11 per cent in October and November 2025. This recovery has been driven largely by a consumption-led improvement in demand.
The report also noted that the full 100 basis point Cash Reserve Ratio (CRR) cut is now in place, and along with recent supportive regulatory measures, this is expected to provide further support to credit expansion in the coming months.
On the back of these developments, the report said it expects system credit growth to remain at 12 per cent or higher on a year-on-year basis in FY26 and improve further to around 13 per cent in FY27.
Within its coverage universe, the report expects large private sector banks to record growth of around 3-4 per cent on a quarter-on-quarter basis, while mid-sized banks are likely to grow at a faster pace.
On the deposit side, the report pointed out that system deposit growth has remained stable at 9.7 per cent year-on-year as of December 2025. Deposit growth has largely stayed range-bound at 9-10 per cent over the past year.
The report said competitive intensity in deposits remains elevated, with banks continuing to face challenges in mobilising low-cost funding.
However, the report added that ongoing repricing of term deposits is expected to lead to a moderation in the cost of funds during the third and fourth quarters of FY26. This is likely to partially offset the impact of the recent 25 basis point repo rate cut by the Reserve Bank of India.
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