PSU banks see uptick in credit demand in vehicle, consumer durable loans post-GST cut, say bankers

Indian PSU banks

The government’s recent reduction in the Goods and Services Tax (GST) has sparked a surge in consumer spending, with state-owned banks witnessing robust demand for retail loans, particularly in vehicle and consumer durable segments during the ongoing festive season, bankers told Moneycontrol.

They added that this spike in retail demand is driving overall credit growth across the financial system and could potentially surpass earlier projections of 10–12 percent growth for the current fiscal year.

“The festive momentum, coupled with the GST cut, has clearly boosted consumer sentiment,” said a senior public sector banker. “We’re seeing strong traction in auto loans and loans for big-ticket purchases like home appliances and electronics.”

The GST reduction has made several consumer goods and vehicles more affordable, prompting higher discretionary spending at a time when the market traditionally sees heightened demand. Dealers and manufacturers have also rolled out aggressive festive offers, further amplifying the credit uptick.

On August 26, Moneycontrol reported that 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.

Experts are of the view that the GST cuts have set the stage for a demand revival that could spill over into stronger bank lending even as trade uncertainties and tariff risks continues.

The cuts come weeks ahead of the peak festival period, which typically sees an uptick in big-ticket purchases such as vehicles, consumer durables and even homes.

On September 3, the goods and services tax council cut levies on small cars, televisions, air conditioners, textiles and a range of household goods from September 22, in a major rate overhaul aimed at spurring consumption ahead of the festive season, even as Trump's tariffs threaten the country's exports.