New Delhi,sep 9
Domestic credit growth in India could moderate to 15 per cent by March 2027 from around 18 per cent currently as a higher base from December weighs on growth, while banks may still see stronger expansion through their overseas branches, Jefferies said in its latest report.The report said bank credit growth has remained strong, supported by higher credit demand and banks gaining market share from bonds and external commercial borrowings (ECBs). However, it expects the pace of domestic credit growth to ease as the base effect becomes stronger from December 2026.”We expect sector domestic credit growth to moderate from 18% now to 15% by Mar-27 as base resets in Dec-26,” Jefferies said.The brokerage noted that system credit growth stood at 18 per cent year-on-year, while deposit growth had also strengthened following strong inflows under the foreign-currency deposit scheme. It said system credit growth “stays robust”, supported by stronger credit demand and market share gains from bonds and ECBs. At the same time, Jefferies expects banks’ overall credit growth to benefit from their foreign operations. “Banks’ credit growth can improve by 3-4ppt as it captures the leverage provided by their foreign branches,” the brokerage said.The report also highlighted that deposit growth could rise further to 17 per cent as the full impact of foreign-currency inflows comes through, before seeing a “slight normalisation to 15-16% by Mar-27”. System deposit growth had reached 15 per cent year-on-year as of August 14, compared with 13 per cent in June.Recent lending data showed corporate loans remained the main driver of bank credit growth. Corporate credit grew 22 per cent year-on-year in July, compared with 16 per cent for retail loans and 17 per cent for agriculture.Within corporate lending, loans to NBFCs and engineering grew 36 per cent each, while petroleum and gems and jewellery loans rose 34 per cent and 36 per cent, respectively. Overall bank credit growth was 19 per cent in July.Jefferies’ outlook therefore points to continued strong credit expansion in the near term, followed by a moderation in domestic growth as the comparison base resets, while banks could partly offset this through greater leverage of their foreign branches.
