Mumbai, Jan 28 Indian banks are expected to witness credit growth at about 10–12 per cent compound annual growth rate (CAGR) over the next five years, higher than deposit growth of roughly 9–11 per cent, a report said on Wednesday.
The report from Brickwork Ratings said credit‑to‑deposit ratios are likely to remain in the high‑70s to low‑80s range unless a major structural shift occurs. The rating agency said that retail, MSME and services will be key drivers of credit growth with housing, vehicle, consumer and cash‑flow‑backed SME lending leading the growth.
The expected deposits growth of banks will broadly track nominal GDP and credit expansion while remaining below the high-teens growth seen in earlier years.
"The asset quality of Indian banks has improved markedly with gross NPAs (GNPAs) falling to multi‑year lows around 2.2 per cent in September 2025," the report said. Scheduled commercial banks’ capital buffers remained strong, as they maintained capital adequacy ratio (CRAR) of around 17.2 per cent as of September 2025.
“Overall outlook for the banking sector is stable to positive, with India's banking sector well capitalised to navigate growth, shocks and Basel IV transitions with minimal systemic infusions, whenever required. Potential risks include higher risk‑weighted assets from unsecured retail exposure or regulatory changes such as revised risk weights, but strong capital reserves and profitability provide buffers,” said Hemant Sagare, Director – Ratings, Brickwork Ratings.
System level CASA ratios have remained in the high‑30s range, but the mix is likely to gradually tilt further towards term deposits, pressuring funding costs and net interest margins unless banks ramp up fee income and operating efficiency, the report said.
“Corporate credit growth is expected to be driven by government capex in private investment, and fresh borrowing, especially in infrastructure, renewables, urban real estate and select manufacturing,” said Manu Sehgal, CEO, Brickwork Ratings.
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