India’s Systematic Credit Growth Expected at 13.5% in FY27: Motilal Oswal Report
New Delhi: India’s systematic credit growth reached 13.8% as of March 15 and is projected to remain around 13.5% in FY27, supported by consumption-driven demand following liquidity measures and GST cuts, according to a report released on Thursday.
The report by Motilal Oswal Financial Services highlights that banks have scope to further increase their credit-to-deposit (CD) ratio, as deposit growth remains steady at 10.8% while credit growth has pushed the CD ratio to 83%.
Lower deposit rates are making it challenging for banks to raise funds at cheaper costs, suggesting that interest rates on fixed deposits (FDs) are likely to remain stable. The brokerage expects that the Reserve Bank of India’s LCR-NSFR framework and a reduction in the cash reserve ratio will further support CD ratio expansion, benefiting public sector banks.
Key projections include:
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Systematic credit growth: ~13.5% in FY27
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Deposit growth: ~11.5%
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Net interest margins expected to remain within a limited range, with medium-sized banks likely to see better margin expansion
The report also noted that the 25 bps repo rate cut in December 2025 is expected to reflect fully in loan rate transmission by Q4, keeping financing costs elevated, while most banks have not yet passed on the rate cuts to TD/SA deposit rates.
Overall, the report underscores steady credit expansion amid controlled deposit growth, signaling a favorable environment for lending while banks navigate funding cost pressures.
