India's credit growth to be 10-12% CAGR over next 5 yrs: Brickwork Ratings

India's credit growth is expected to clock 10-12% CAGR over the next five years, led by retail, MSMEs and services, outpacing deposit growth, says Brickwork Ratings

India’s credit growth is expected to be nearly 10–12 per cent CAGR over the next five years, with retail, MSMEs and the services sector being the key drivers of growth. This is expected to be faster than deposit growth, which is pegged at 9–11 per cent, according to Brickwork Ratings.

 

According to the rating agency, housing, vehicle or consumer and cash-flow-backed SME lending will also support growth. Over the next five years, banking assets as a share of gross domestic product (GDP) are also expected to deepen.

 

“Corporate credit growth is expected to be driven by government capex, private investment and fresh borrowing, especially in infrastructure, renewables, urban real estate and select manufacturing,” said Manu Sehgal, chief executive officer, Brickwork Ratings.

 

 

On the other hand, deposit growth is projected at nearly 9–11 per cent CAGR over the next five years, broadly tracking nominal GDP and credit expansion while remaining below the high-teens growth seen in earlier years.

 

Credit-to-deposit (CD) ratios are likely to remain in the high 70s to low 80s range unless a major structural shift occurs. Also, system-level CASA ratios, which have remained in the high-30s range, are likely to gradually shift further towards term deposits, impacting funding costs and net interest margins unless banks ramp up fee income and operating efficiency.

 

The asset quality of Indian banks has also improved, with gross non-performing assets (GNPAs) falling to multi-year lows of around 2.2 per cent in September 2025. The capital adequacy ratio (CRAR) of scheduled commercial banks (SCBs) remained strong. Banks maintained solid capital buffers, with CRAR at around 17.2 per cent as of September 2025.

 

“The credit rating outlook remains stable to positive, supported by strong capitalisation and controlled asset quality. CRAR is expected to stay above 16 per cent, while GNPA ratios are projected to remain within stress-test thresholds,” Sagare said.

 

The banking sector is also facing rising risks from intensifying competition, tighter regulation and global shocks. Nearly 50 per cent of India’s share of global digital transactions heightens cybersecurity exposure.

 

Regulatory measures effective by FY26, including risk weight normalisation and PSL changes, should also aid credit growth. Despite global macro and liquidity risks, capital buffers and policy support underpin rating stability.

 

“Meanwhile, stricter Basel norms and digital lending rules are driving up compliance costs. As deposit repricing lags and credit growth outpaces deposits, NIM is expected to dip 10–15 basis points in FY26 and stabilise in the low-3 per cent range from FY27, while macro and liquidity volatility remain key risks,” Sagare added.