Global brokerage Nomura predicts a brighter lending cycle for Indian banks, with credit growth expected to pick up pace in the coming financial years.

How fast can India’s banks turn cautious lending into fresh growth? This question is at the centre of the September 2025 Nomura report on Indian banks. The report forecasts a revival of credit growth in the system, which has slowed to single digits after a strong run in earlier years.

According to Reserve Bank of India (RBI) data, overall bank credit grew 12.1 per cent year-on-year in June 2025, lower than 14.9 per cent in June 2024. Nomura now projects growth returning to around 12 per cent by FY26, supported by easing asset quality stress and stronger performance in retail lending.

Nomura Loan Growth Revival In Indian Banks

The Nomura report, published on 16 September 2025, highlights three drivers for the shift. First, unsecured retail loans such as personal loans and credit cards are showing fewer early defaults. Second, microfinance institutions are seeing recoveries improve. Third, large lenders are adding market share in deposits and loans.

Supporting this optimism, the RBI’s Financial Stability Report released in June 2025 noted that the gross non-performing asset (GNPA) ratio for 46 banks stood at 2.8 per cent in March 2025, one of the lowest in decades. The report also projected the ratio at 3.1 per cent by March 2027 under a baseline scenario.

The data show the slowdown in growth but also the improvement in balance sheet quality.

Year	Overall Credit Growth	Industrial Credit Growth	GNPA Ratio
June 2024	14.90%	11.30%	3.20%
June 2025	12.10%	7.60%	2.80%
March 2027 (Proj.)	—	—	3.10%

These numbers underline how the system has slowed but become safer. The trend gives confidence to analysts betting on a recovery cycle.

ICICI Bank, SBI, Axis Bank Investment Outlook

Nomura has put its focus on ICICI Bank, State Bank of India, and Axis Bank as the best placed to capture the revival. Each of these banks holds strong loan books, deposit bases, and retail strength.

State Bank of India, as the largest public sector lender, recorded 13.1 per cent loan growth in FY25, faster than the private sector average of 9 per cent. ICICI Bank and Axis Bank, though private lenders, have built large unsecured portfolios, where early signs of recovery are clear.

The brokerage notes that smaller and mid-tier banks face greater risks as they lack deposit strength and carry heavier exposure to riskier segments.

Bank Type	FY25 Loan Growth (YoY)	Observed Strength
Public Sector Banks	13.10%	Wider branch network
Private Sector Banks	9.00%	Retail segment reach
Mid-tier Banks	6–8%	Narrow balance sheets

The table shows why large lenders are drawing investor attention. Their size and reach give them better room to balance risk and growth.

Top Banking Stocks India Loan Growth 2025

Loan growth has become a talking point for investors looking at banking stocks in 2025. While credit demand is recovering, earnings face pressure. In August 2025, The Economic Times reported that earnings growth for Indian banks could slow in FY26 due to higher deposit costs and tighter margins. LoansJagat reported on how loan spreads are widening as banks focus on protecting margins.

This dual trend shows that stronger loan books do not always translate into higher profits. Investors are weighing between growth in lending and strain on margins.

Factor	2024–25 Trend	Effect on Banks
Loan Growth	Slowed to 12.1%	Moderation in income
Deposit Costs	Rising	Narrower spreads
Asset Quality	Improved	Confidence in balance sheet

The picture shows growth in credit but pressure on profitability. It sets the stage for stock pickers to favour large, stable lenders over smaller peers.

Nomura Bullish On Indian Private And Public Banks

Optimism in 2025 is not the first time Indian banks have seen recovery calls. In earlier cycles, government and RBI interventions created similar revivals.

In April 2025, the RBI introduced a new liquidity rule that freed nearly ₹29,000 crore for lending. In 2020, a cut in the cash reserve ratio added funds during the pandemic slowdown. In 2017, the government recapitalised public sector banks to strengthen their balance sheets.

These actions show that regulators step in when banks face funding strain. Nomura’s bullish stance on both private and public banks in September 2025 reflects confidence that such measures, along with stable asset quality, will drive growth.

Policy Action	Year	Outcome
Liquidity Rule Adjustment	2025	Added ₹29,000 crore
CRR Cut	2020	Eased pandemic stress
PSU Recapitalisation	2017	Strengthened weak lenders

These policy steps underline that credit revival is often a mix of market demand and regulatory support. Today’s phase is another such cycle, where both banks and policymakers are aligned for growth.

Loan Growth Recovery Driving Indian Bank Stocks

Investor reaction has been quick. Bank stocks have moved higher in September 2025 following Nomura’s report. ICICI Bank, SBI, and Axis Bank are seeing stronger trading volumes as investors bet on a credit recovery. The broader banking index has also gained, led by these large-cap names.

Yet, the balance is delicate. Earnings outlook remains cautious, with deposit cost pressure expected to stay in FY26. At the same time, the fall in delinquency levels in personal loans and credit cards has given comfort to lenders.

For investors, the bet is clear: loan growth recovery is driving Indian bank stocks, even if profit margins take longer to recover.

Conclusion

The Nomura report of September 2025 has reset the tone for India’s banking debate. It forecasts a return of credit growth, backed by improving asset quality and stronger showings by large banks.

RBI numbers confirm slower lending but safer balance sheets. Public banks like SBI are already outpacing private peers, while private leaders like ICICI Bank and Axis Bank remain well placed. Past government steps show how policy support has often triggered revivals, and the present cycle carries similar signs.

The Indian banking system is entering a new phase. Growth is modest but steady, risks are falling, and large lenders are gaining. For investors, this is a moment to track the movement of ICICI Bank, SBI, and Axis Bank, as they remain the top picks in an evolving credit cycle.

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