A report by ICRA and ASSOCHAM has said that fresh slippages in the banking sector are likely to increase in the near future owing to emerging stress in the retail and Micro, Small, and Medium Enterprises (MSME) segments, even as overall asset quality remains strong. Despite this, the report stated the impact on overall asset quality to remain limited with gross non-performing assets (GNPAs) and net NPAs (NNPAs) projected to stay at benign levels. 

As per report, the sector's headline asset quality metrics continue to improve, with GNPAs at a decadal low, supported by contained slippages and steady recoveries bringing down bad loans. Further, on the credit growth front, ICRA projects a marginally higher increase of Rs 25–26 lakh crore, or 13.7-14.3 per cent year-on-year growth for FY26. credit expansion is expected to be Rs 23.50-25 lakh crore For FY27. 

Credit demand is likely to remain buoyant, with retail and MSME segments continuing to be the key growth drivers. The start of FY26 saw a slow credit offtake as banks remained cautious towards the retail segment and non-banking financial companies (NBFCs), while corporates turned to bond markets due to lower yields. However, Credit growth accelerated by the end of the first half of FY26 and the momentum continued into the Q3FY26, supported by sustained economic activity and demand for channel financing and retail loans following the goods and services tax (GST) cut on September 22, 2025.