Bank Loan Growth May Decline, NPA Increase Expected: Crisil Ratings

Mumbai, April 1 — Amid ongoing conflicts in West Asia, domestic rating agency Crisil has projected a slight decline in bank loan growth and an increase in defaults in the fiscal year 2026-27. Crisil stated that banks are expected to record a 13 percent increase in loans for 2026-27, which is a slight drop from the estimated 14 percent for the fiscal year 2025-26.

The rating agency also mentioned that banks' gross non-performing assets (NPAs) have reached their minimum level and could increase by 0.20 percent to 2.5 percent by March 2027.

Chief Rating Officer Krishnan Sitaraman emphasized the need to monitor loans given to micro, small, and medium enterprises, particularly those small industries that have markets in West Asia or procure raw materials from there. Additionally, there is a need to keep an eye on small loans secured against assets and some unsecured loans.

He acknowledged that sectors such as ceramics and diamond polishing are already facing adverse conditions due to the ongoing war in West Asia.

When asked whether a relief package could be provided in light of the West Asia conflict, Crisil officials stated that fiscal and monetary authorities could take appropriate measures for the industry following adverse events.

The rating agency noted that these measures could be implemented if the war persists. However, it is currently difficult to estimate the exact impact of relief measures.

Besides asset quality, there is also a need to monitor deposit mobilization by banks, as this will also affect loan growth. Crisil stated that the final loan growth will depend on the performance of banks in mobilizing deposits.