The rating agency ICRA has changed the estimate of a possible decline in its earlier GDP growth. The agency says that the recent GST cut has given great support to consumption. Apart from this, due to relief in income tax, this year, the consumer of the country will get Rs 3 lakh crore, which will improve the credit growth and credit quality of banks and NBFCs.
ICRA Chief Economist Aditi Nair said that the reduction in GST rates was unexpected and was implemented very quickly. He said that we had earlier reduced our growth rate for FY26 from 6.5% to 6.2% and then 6%, as there is pressure on exports due to American tariff. But this estimate of this decision of the government has once again come to 6.5%. Nair further said that GST and Income Tax relief, as well as by the end of this year, will further strengthen the demand demand for RBI’s possible interest rate.
The equation will change like this
Regarding banks, ICRA Senior Vice-Pressurer Anil Gupta said that due to more money in the pockets of the people, the demand for retail loan will increase and the asset quality will remain stable. He told that it is difficult to say how much of the additional income will take to repay the debt and how much will be consumed. If consumption increases, corporate investment may also increase. Gupta also said that the bank’s margin is under pressure due to rising interest rates on deposits, but strong credit growth and stable asset quality will be balanced to a great extent. The old NPAs are either getting right-off or upgraded and we expect to improve credit quality.
Credit of banks will improve
ICRA estimates that the additional credit of banks in FY26 can reach Rs 19-20.5 lakh crore, which will be more than Rs 18 lakh crore in FY25. It would be 10.411.3% growth, while in FY25 it was 10.9% and 16.3% in FY24. The NBFC Credit FY26 is expected to increase by 1517%, while it was 17% in FY25 and 24% in FY24. However, in FY26 (April -August), the increase of bank credit has come down to Rs 3.9 lakh crore, which was Rs 5.1 lakh crore last year. ICRA believes that GST rates and CRR deduction will further increase demand.