GST cuts to support banks and NBFCs’ credit growth, no direct impact of tariff on lenders: ICRA

Bank credit

The evolving macro-economic landscape, underscored by the US tariff on exporters, is not expected to have any direct impact on lenders, rating agency ICRA said on September 10, adding that the GST reforms will be supportive of credit growth.

Banks and NBFCs’ credit growth will get support from the recent GST reforms - aimed at spurring domestic demand - and it will partly offset the impact of Trump’s tariffs on exporters, ICRA added.

“With improvement in economic activity post GST rate cuts, the growth appetite shall improve, which will support credit growth,” said Anil Gupta, Senior Vice President & Co-Group Head, ICRA.

The incremental credit flows of banks is expected to rise to Rs 19.0-20.5 lakh crore during FY26, compared to Rs 18 lakh crore in FY25, said ICRA, marking a year-on-year credit growth of 10.4-11.3 percent, as compared to 10.9 percent in FY25 and 16.3 percent in FY24.

The NBFCs’ credit is projected to grow by 15-17 percent in the current fiscal year compared to 17 percent in FY25, and 24 percent in FY24, the release added.

However, ICRA said the second order effect of Trump’s tariffs are likely to have an impact on the personal loan segment, with banks and NBFCs already going slow for over a year now.

According to ICRA, the gradual downward repricing of deposit base is likely to improve the competitive positioning of banks vis a vis debt capital markets for the rest of the year. Additionally, easing of credit to deposit ratio and abundant liquidity in the banking system shall also be supportive of credit growth.