Credit Rating Information Services of India Limited (CRISIL) Ratings has warned that bank credit growth in India may ease to 13 per cent in FY27, reflecting a moderation from recent cyclical highs. The agency noted that this slowdown would coincide with heightened risks in the micro, small and medium enterprises (MSMEs) sector. CRISIL indicated that banks may face a slower pace of fresh lending as demand softens. The outlook reflects a transition from cyclical credit recovery to a more calibrated growth phase.

Slower deposit mobilisation and a gradual normalisation of the liquidity cycle are expected to tighten available lending capacity. Banks may prioritise secured exposures and larger corporates, thereby constraining credit flows to riskier segments. The agency cited tighter underwriting and selective credit deployment as likely responses by lenders. Smaller lenders may face sharper trade-offs between growth and capital conservation in this environment.

Micro, small and medium enterprises are likely to be most affected given their greater reliance on working capital and limited access to diversified funding. Rising input costs and weaker demand could amplify stress for firms with thin buffers. CRISIL suggested that pockets of stress may emerge in industries with concentrated exposure or seasonal cash flows. Access to formal channels and improved receivables management will be key determinants of resilience for many firms.

The potential moderation in credit growth is likely to keep asset quality under watch and prompt banks to shore up provisions where necessary. Policy measures and targeted liquidity support could help alleviate pressures on viable MSMEs and maintain credit access. CRISIL emphasised the need for continued monitoring by regulators and lenders as the operating environment evolves. Banks are expected to balance risk management with the objective of supporting economic activity as conditions moderate.