Crisil: West Asia Conflict to Affect Credit Growth and Delinquencies in FY27

Crisil, a domestic rating agency, has projected a slight moderation in banks' credit growth for the fiscal year 2026-27, expecting it to shrink to 13% from a projected 14% in FY26. The West Asia conflict is seen as a major contributing factor to this downturn.

The agency also foresees a rise in non-performing assets, potentially increasing by up to 0.20% to reach 2.5% by March 2027. Loans to micro, small, and medium enterprises with West Asia connections are the primary areas of concern, with affected sectors including ceramics and diamond polishing.

Besides geopolitical factors, domestic issues like Bihar's microfinance bill and Maharashtra's loan waiver scheme also pose risks. Crisil officials highlight that fiscal and monetary authorities may implement relief packages if necessary, though predictions remain challenging without assuming any such measures.