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Banking provisional business trends indicate sustained momentum

ICICIdirect Research 03 Apr 2026 DISCLAIMER

System-wide credit growth remained healthy at ~14.3% YoY as of Feb’26, though RBI has altered reporting period to month end which may exhibit marginal upward bias. The aforesaid growth has been contributed by across segments. While MSME segment witnessed continued strength in lending (growing at ~25% YoY), reflecting robust underlying demand, large corporate lending growth improved to 7.8% YoY, indicating gradual recovery in capex and increasing credit demand for working capital.
Retail credit growth also remained steady at ~15.2% YoY, though segments like credit cards continued to see moderation (+1.7% YoY), while gold loans witnessed sharp traction (+128% YoY), driven by strong demand and favourable pricing dynamics. Home loans, largest contributor in retail loans, witnessed continued steady momentum (+11% YoY).
Services segment growth remained buoyant at 16.3% YoY, driven by traction in lending to NBFC (20.9% YoY) and commercial real estate (17.4% YoY).
Against this backdrop, provisional Q4FY26 updates from mid-sized banks so far are encouraging, indicating steady business momentum, with healthy traction in advances and stable deposit accretion. Importantly, most banks reported a sequential improvement in CASA ratios—Indian Bank (+78 bps QoQ), Karnataka Bank (+212 bps QoQ), and South Indian Bank (+28 bps QoQ)—which could be a year-end phenomenon, though anticipated to aid margins in near term.
Overall, while growth remains broadly aligned with industry trends, improving CASA mix and strengthening liability franchises emerge as key positives. The focus over the next few quarters will be on sustaining continued traction in deposits, while ensuring asset quality remains resilient amid geopolitical uncertainties, to support long-term stability and profitability.

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