Festive Season and GST Cuts to Boost Credit Growth in H2FY26: Banks Launch Attractive Loan Offers

Banks are launching attractive loan offers, betting on a boost in credit growth during the festive season and after GST cuts. Retail lending is expected to see significant growth in H2 FY25, with credit growth projected to rise to 10.4-11.3% YoY in FY26. The recent GST cuts are seen as a catalyst for higher demand and economic activities, leading to a rise in household confidence and credit growth. Banks are rolling out festive-season offers to entice customers to borrow more, particularly retail customers.

After a subdued first quarter, Indian banks are gearing up for a robust second half of the financial year, driven by festive season optimism and the recent Goods and Services Tax (GST) cuts. Retail lending is expected to see significant growth, with credit growth projected to rise to 10.4-11.3% year-on-year (YoY) in FY26 [1].

In Q1, bank credit growth was muted as both retail and corporate loan segments slowed. However, banks are now hopeful that the festive season, coupled with lower inflation, softer interest rates, and higher disposable income from tax relief in the Union Budget and GST cuts, will boost demand and lift retail credit [1].

According to a Motilal Oswal report, the banking sector will benefit from the GST cut through second-order flow, as consumption and economic activities should pick up. Household confidence and demand for debt are expected to rise, and credit growth should move into double digits in H2FY26. Direct benefits will be seen for consumer-heavy lenders and credit card players [1].

Anil Gupta, Co-Group Head, Financial Sector, ICRA, said credit growth has been weak so far in the current fiscal, creating space for downward revision in credit growth estimates. However, factoring in likely benefits from GST reforms, credit growth is expected to be within the estimate of 10.4-11.3% YoY growth in FY26 (Rs 19-20.5 trillion) [1].

Banks are rolling out festive-season offers to entice customers to borrow more, especially retail customers. State-owned Bank of Baroda (BoB) has cut interest rates on car loans by 25 basis points (bps), reducing them to 8.15% from 8.40%, and on its loan against property (LAP) offering by 60 bps, bringing it down to 9.15% from 9.85% [1].

The country’s largest private sector lender, HDFC Bank, is also coming up with attractive offers for its customers – Festive Treat – to encourage them to maximize their savings on festive shopping. Axis Bank has partnered with leading brands to offer a curated bouquet of deals and discounts on credit and debit cards, along with easy EMIs on big-ticket purchases like electronics and travel [1].

Credo Technology Group Holding Ltd, a company focused on reliable connectivity solutions, reported strong Q1 FY26 financial results, showcasing significant growth and profitability. The company reported a 274% YoY increase in revenue, driven by strategic partnerships and market demand for high-speed and energy-efficient connectivity solutions [2].

References:
[1] https://www.business-standard.com/industry/banking/banks-betting-festive-season-gst-cut-boost-credit-growth-h2fy25-125090401451_1.html
[2] https://www.ainvest.com/news/credo-technology-reports-q1-fy26-financial-results-revenue-274-yoy-223-1mln-2509/