Indian banks are projected to experience a credit growth of around 10–12% compound annual growth rate (CAGR) in the next five years, surpassing the deposit growth of approximately 9–11%, as per a report by Brickwork Ratings. The report highlights that credit‑to‑deposit ratios are expected to stay within the high‑70s to low‑80s range unless there is a significant structural change. It emphasizes that retail, MSME, and services sectors will drive credit growth, with housing, vehicle, consumer, and cash‑flow‑backed SME lending leading the way.
The report anticipates that the growth in bank deposits will closely follow nominal GDP and credit expansion, albeit below the high-teens growth observed in previous years. It also notes a significant improvement in the asset quality of Indian banks, with gross NPAs (GNPAs) dropping to multi‑year lows of about 2.2% in September 2025. Scheduled commercial banks have maintained strong capital buffers, with a capital adequacy ratio (CRAR) of around 17.2% as of September 2025.
According to Hemant Sagare, Director – Ratings at Brickwork Ratings, the overall outlook for the banking sector is stable to positive, with Indian banks well capitalized to handle growth, shocks, and Basel IV transitions with minimal systemic infusions when necessary. While potential risks include higher risk‑weighted assets from unsecured retail exposure or regulatory changes, the sector’s robust capital reserves and profitability act as buffers.
The report mentions that system level CASA ratios have consistently been in the high‑30s range, but there is a gradual expected shift towards term deposits, which could increase funding costs and pressure net interest margins unless banks enhance fee income and operational efficiency. Manu Sehgal, CEO of Brickwork Ratings, predicts that corporate credit growth will be fueled by government capex in private investment, fresh borrowing, particularly in infrastructure, renewables, urban real estate, and select manufacturing sectors.
