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Banks and NBFCs poised to gain from this retail consumption revival

ICICIdirect Research 26 Sep 2025 DISCLAIMER

Starting from FY26, government and RBI has undertaken several measures to provide boost to the economy, making lenders well placed to witness a sharp revival in credit demand. Relief in direct tax was followed by 100-bps cut in repo rate cut in the initial phase, while favorable monsoon and recent deduction in GST rate were undertaken as measures to lift consumer sentiment and thus growth in H2FY26. This should translate into higher spending across automobiles, housing, consumer durables, and other discretionary items, driving stronger credit momentum for banks and NBFCs across key retail segments.
Auto loans: GST cut has already led to stronger sales volumes, particularly for passenger vehicles. This is creating a healthy demand pipeline for auto financing, with lenders such as IDFC First (~9.5%), HDFC Bank (~5.5%), Axis Bank (~5.9%), Bajaj Finance, and M&M Finance (PV segment - ~40%) positioned to benefit.
Housing loans: Housing segment is also expected to witness renewed traction, supported by lower interest rates and tax reliefs. Affordable housing players like Aadhar Housing and CanFin Homes are expected to see strong demand.
Personal/consumer loans: Lenders with deep retail penetration such as Bajaj Finance, HDFC Bank (~12%), Axis Bank (~11.4%) and SBI (~11.7%), SBI Cards are likely to capture incremental demand in electronics, household items, and other consumer discretionary products along with gradual revival in unsecured retail loan (credit cards and personal loans).
Overall, with policy support feeding into consumption, retail lending across auto, housing, credit cards, and consumer finance is set for a broad-based uplift in H2FY26. This positions well-diversified financiers and banks to deliver stronger growth in the coming quarters.

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