India’s banks see softer profitability in 2026 despite robust growth

Authorities' measures to boost consumption and investment will sustain revenues.

Banks in India are expected to deliver a "robust" performance in 2026 although profitability will soften slightly.

Indian banks face a backdrop of normalizing credit costs, easing margin pressures as declining deposit costs are largely offset by lower loan yields, and supportive funding and liquidity conditions, Fitch Ratings said in its Emerging Market Banks Outlook 2026 report.

Loan growth is expected to come at around 12%, similar to 2025, Fitch said.

Banks in India are particularly expected to benefit from infrastructure spending. It is expected to pave the way for robust economic growth and in turn support banks' asset quality," S&P Global Ratings said in a report published in August 2025.

Authorities' measures to boost consumption and investment will also help sustain revenue generation and loan growth of the banks, Fitch said.

As of early October, total bank credit rose 11.4% year-on-year to $2.12t, driven by festive demand and the impact of GST rate cuts on housing, autos, and consumer goods, according to a report by CareEdge Ratings.

The pace, however, was slower than last year’s 14.1% growth due to a high base and weaker corporate and non-bank financial companies' (NBFC) lending.