Indian banks to see 11.5%-12.5% credit growth despite global challenges, with strong fundamentals and low risk exposure.

Indian banks are set for steady credit growth of 11.5%–12.5% over the next two fiscal years despite global economic headwinds, according to S&P Global Ratings. Strong domestic fundamentals, low exposure to vulnerable sectors (just 2% of loans in textiles and gems/jewelry), and robust corporate deleveraging support resilience. While credit costs are expected to rise to 80–90 basis points due to stress in unsecured retail and SME loans, banks are well-positioned to absorb losses, with pre-provision profits remaining strong. The rupee’s depreciation has limited impact due to low external borrowing and widespread hedging. Profitability is expected to stay above average, though net interest margins may slightly compress to around 3.4%.