GST bazooka: Lenders raise credit growth expectations for FY26

Banks have raised their expectations for credit growth for the current fiscal year, partly due to the GST rate cuts at the end of September, lower interest rates following a 100 basis point (bps) repo cut and the central bank’s relaxation of banking regulations.

The country’s largest lender State Bank of India (SBI) noted that the various ‘banking reforms’ introduced by the Reserve Bank of India (RBI) at the last Monetary Policy Committee meeting are credit enhancing.

“At the sector level, we should see an additional 1 per cent credit growth (for FY26). We are also revising our credit growth expectations from 11 per cent to 12-14 per cent. There is robust growth across all business segments in the second quarter… this is based on the many opportunities given by the RBI and also the fiscal measures in terms of GST 2.0. We believe there will be sustained credit demand, which presents us with opportunities, especially in RAM (retail, agriculture and MSME) segment…,” said CS Setty, chairman of SBI in an earnings call.

SBI saw strong demand for auto and personal loans after the GST rate cuts in September, he said.

According to Amitabh Chaudhry, MD, CEO, Axis Bank, while rate-related developments will provide headwinds in H1FY26, repo cuts, favorable monsoon, lower GST and improving liquidity conditions will provide strong tailwinds in H2FY26.

“These factors, combined with a series of progressive RBI policy interventions aimed at strengthening the financial ecosystem, set the stage for acceleration in credit growth,” Chaudhry said in an analyst call, adding that Axis will grow 3 percent higher than the industry.

NBFCs

Umesh Revankar, vice chairman at Shriram Finance, said that after the implementation of GST 2.0 in the last week of September, the NBFC saw higher credit demand, especially in the two-wheeler and car segments. He said the NBFC expects 15 per cent loan growth for FY26 but could report higher growth of 17 to 18 per cent.

Jairam Sridharan, MD, CEO at Piramal Finance, says while used cars are being sold at a lower rate due to the GST cut, the increase in units sold makes up for the same. “Our AUM growth forecast for the fiscal year is 25 percent…Currently we are not revising our expectations, but the trend is significantly above what we expected at the beginning of the year…,” he said.

Published on November 9, 2025