The Report discusses the present and future of the Indian Banking System in light of the rate cut cycle. It argues that we are at the turning point into the next phase of the banking cycle. Growth rate of credit and deposit are expected to unite after four fiscals, helped by plush liquidity. Outlook for credit growth segment wise indicates that industry credit growth will continue is middling pace with lower private capex projected for FY26, coupled with loss of share to key FIs and bond markets. Services credit growth will be impacted by NBFCs opportunistically tapping into the bond markets, with MCLR-corporate yield spreads at highs. Personal loans are expected to emerge as a bright light aided by regulatory rollbacks. On the deposit side, growth is expected to moderate to near long-term averages with financialisation remaining a secular trend. The Report also delves into the quality of deposits and differences between PVB and PSB. The Report then offers a view on NIM considering the rate cut cycle where lending rates are likely to reset faster than deposit rates. Finally, an overview of FY25 results of major banks is provided.
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