After a subdued first quarter of 2025-26 (Q1FY26), banks are now betting big on the festive season, rolling out attractive loan offers to boost credit growth in the second half of the current financial year (H2FY26) - a trend likely to be further accentuated by the second-order effects of the good services tax (GST) cuts.
In Q1, bank credit growth was muted as both retail and corporate loan segments slowed.
However, banks remain hopeful that the festive season, coupled with lower inflation, softer interest rates, higher disposable income from tax reliefs in the Union Budget, and GST cuts will boost demand and lift retail credit.
According to a Motilal Oswal report, the banking sector will benefit from (the GST cut) second-order flow through as consumption and economic activities should pick up.
Household confidence and demand for debt should also move up and credit growth should move into double digits in H2FY26.
There could be direct benefits for consumer-heavy lenders and credit card players, the report said.
Anil Gupta, co-group head, financial sector, Icra, said credit growth has been weak so far in FY26, creating space for downward revision in credit growth estimates.
However, now factoring in likely benefits from GST reforms, credit growth is expected to be within the estimate of 10.4-11.3 per cent year-on-year (Y-o-Y) in FY26 (Rs 19-20.5 trillion).
“Retail loan pickup is expected to improve in the festive season, spanning September 2025-March 2026, in response to the GST bonanza”, Gupta said.
Latest data suggested bank credit was growing at 10.2 per cent Y-o-Y while deposit was growing at 10.1 per cent Y-o-Y in the fortnight ended August 8.
In the same period last year, credit was growing at 13.6 per cent Y-o-Y and deposit at 10.87 per cent Y-o-Y.
Banks are also rolling out festive season offers to entice customers, especially retail customers, to borrow more.
Last year, banks rolled out offers on deposits as deposit growth was lagging credit growth.
State-owned Bank of Baroda (BoB) has cut interest rate on car loans by 25 basis points (bps), reducing it to 8.15 per cent from 8.40 per cent, effective immediately.
Additionally, the bank has also reduced interest rate on its loan against property offering — the Baroda Mortgage Loan — by 60 bps, bringing the same down to 9.15 per cent from 9.75 per cent, also effective immediately.
The new rate, starting at 8.15 per cent per annum, is applicable to loans for the purchase of new cars, and is linked to the borrower’s credit profile, the bank said.
Further, the bank is offering a fixed rate of interest on car loans — linked to the six-month marginal cost of funds-based lending rate (MCLR) — starting at 8.65 per cent.
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 maximise their savings on their shopping.
“We started the season with the Onam festival in Kerala last week, with attractive offers for individuals and businesses.
"Likewise, there are several special offers available across the country, on a range of products like loans, credit and debit cards, savings accounts, and PayZapp, among others,” said Ravi Santhanam, group head and CMO, head-direct to consumer products, HDFC Bank.
He added that depending on the eligibility of the customer, they can get attractive offers on loan processing fee and foreclosure charges, and a chance to save up to Rs 50,000 on HDFC Bank credit cards and EasyEMI cards.
Additionally, Axis Bank — India’s third-largest private sector lender — 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.
Arnika Dixit, president & head-cards, payments & wealth management, Axis Bank, said: “Festivals in India bring a surge in spending, with customers seeking value across shopping, travel, and more.
"These exclusive offers will be available throughout the festive season, making every celebration more rewarding and memorable.”
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