Banks bet on 10-12% credit growth in H2FY26 amid festive season despite US tariffs uncertainty

According to the Reserve Bank of India (RBI) data, bank credit growth touched 10.22 percent year-on-year in the fortnight ended August 8, the fastest pace in over three months.

Indian banks are eyeing a revival in credit demand in the second half of the current financial year (H2FY26), with bankers projecting growth in the range of 10–12 percent, supported largely by the upcoming festive season beginning September. However, lenders caution that lingering US tariff uncertainties and trade tensions could pose challenges to sustaining momentum, bankers told Moneycontrol.

“Retail lending, particularly in consumer durables and two-wheelers, is expected to see a strong pickup during the festive months. We anticipate demand in the RAM (Retail, Agriculture, and MSME) segment to be the key driver of growth,” a senior banker at a private sector bank told Moneycontrol on condition of anonymity.

Credit Growth Trends

According to the Reserve Bank of India (RBI) data, bank credit growth touched 10.22 percent year-on-year in the fortnight ended August 8, the fastest pace in over three months. However, the broader picture suggests moderation compared to last year. The average bank credit growth between April and August FY26 stands at 9.94 percent, much lower than the 13.94 percent average growth recorded in FY25.

Festive Season Boost

Historically, credit growth tends to accelerate during India’s festive season, when households step up purchases of vehicles, consumer electronics, home appliances, and other big-ticket items. Banks, in turn, launch aggressive loan campaigns with discounted interest rates and special festive schemes, spurring short-term demand.

“This time too, we expect retail loan growth to lead the recovery. Festive demand could lift credit growth into low double digits,” said another senior banker.

Policy Support

Expectations of stronger credit growth are also being fuelled by potential policy tailwinds. Bankers point to the possibility of an RBI move to reduce the Cash Reserve Ratio (CRR), which would release additional liquidity into the system. This comes at a time when banking system liquidity is already in surplus, partly due to strong government spending and moderating currency demand.

Additionally, the government’s proposed GST reforms, which may lead to lower prices of several goods, are expected to stimulate consumer demand and indirectly support higher lending.