Nomura sees loan growth revival; ICICI Bank, SBI, Axis Bank among top bets

Nomura has picked ICICI Bank, State Bank of India (SBI), and Axis Bank as its top picks to play this recovery trend.

Japan-based brokerage firm Nomura expects a pick-up in loan growth for Indian banks over the medium-term, led by stabilising asset quality in unsecured retail loans, gradual recovery in microfinance, and a favourable policy backdrop. 

 

The brokerage has picked ICICI Bank, State Bank of India (SBI), and Axis Bank as its top picks to play this recovery trend.

 

According to Nomura, India’s retail lending ecosystem is showing signs of improvement across key segments, with stress moderating in unsecured retail loans and early delinquencies easing in credit cards. “We expect growth in the unsecured retail segment (~10 per cent of system credit) to pick-up, led by gradually improving asset quality,” said Ankit Bihani of Nomura, adding that system credit growth is likely to accelerate from 10 per cent year-on-year (Y-o-Y) currently to 12 per cent by FY26F.

 

Retail lending recovery

 

Latest data from credit bureau CRIF as of June 2025 suggests improving borrower behaviour, analysts noted. In personal loans, 31-90 day past due (DPD) levels moderated after a slight uptick in the previous quarter, while early delinquencies in credit cards (1-30 DPD) fell sharply, declining 120 basis points (bps) Y-o-Y and 20 bps quarter-on-quarter (Q-o-Q).

 

Growth in personal loans and credit cards had slowed to 9 per cent and 12 per cent year-on-year, respectively, as of June 2025 (compared with 22 per cent and 27 per cent a year earlier). However, with asset quality stabilising, Nomura believes growth will regain momentum. “Asset quality in the personal loan segment remained stable across all lender categories and ticket sizes,” the brokerage observed.  ALSO READ | Motilal Oswal sees 12% CAGR in luggage sector; VIP, Safari Ind top picks

Microfinance shows signs of repair

 

The microfinance (MFI) segment, which has faced elevated stress in recent years, is also showing early signs of recovery. Nomura highlighted that 31-90 DPD levels improved for a second straight quarter, while delinquencies in the 91-180 day bucket fell below December 2024 levels. However, short-term stress remains visible, with 1-30 DPD rising marginally in Q1FY26 due to seasonal factors.

 

Encouragingly, most of the top-10 states reported quarter-on-quarter improvement in 31-180 DPD, barring Karnataka. Even there, early-stage delinquencies improved, with PAR 1-30 dipping from 3.6 per cent in March 2025 to 1.9 per cent in June 2025.

Diverging trends in small business loans

 

The small business loans segment, covering exposures up to ₹5 crore, also reflected mixed trends. While overall asset quality was largely stable with PAR 31-90 steady at 3.4 per cent year-on-year, some localised stress led to a mild uptick in 91-180 DPD. Notably, private and PSU banks, which together account for 60 per cent of the market, reported improving metrics, while NBFCs and small finance banks (SFBs) saw rising stress, particularly in small-ticket individual business loans.

Favourable policy tailwinds

 

Nomura expects the growth recovery to be supported by policy easing, liquidity improvements, and tax relief measures. “Credit expansion looks favorable amid the RBI’s repo rate and CRR reductions, enhanced liquidity, and supportive tax measures,” it said.

 

Against this backdrop, Nomura believes leading lenders with strong balance sheets and risk management practices are best positioned. The top picks, ICICI Bank, SBI, and Axis Bank, analysts said, are expected to benefit most from the twin tailwinds of stabilising asset quality and accelerating loan growth.