Credit growth picking up pace, banks better placed than NBFCs: Ajit Kumar, JM Financial

News Topical, Digital Desk : Ajit Kumar, lead BFSI research analyst at JM Financial Institutional Securities, said that credit growth in India is showing a clear improvement and could strengthen further by the end of fiscal year 2025-26 (FY26). Speaking at the JM Financial India Xchange 2025 conference, he noted that credit growth has recently increased to "around 11–11.5%," compared to around 10% a few weeks ago. He expects growth to reach "12.5 to 13%" by the end of FY26.

Kumar said he is confident

in the banking sector to benefit from credit growth. "We are more positive on banks than NBFCs," he said, although he also added that he is making some selections from both segments. He reported that banks performed better than expected in the second quarter, with earnings remaining strong where a decline was previously anticipated. Margins showed less pressure than expected, attributed to "better balance sheet management" and disciplined deposit pricing. Expectations for further improvement in margins He said that credit growth, margin performance, and asset quality—all three factors—powered banks' second-quarter results. He sees margins likely to gradually improve in the coming period amid expectations of a reduction in funding costs. "We expect profit after tax (PAT) growth to improve further in the third and fourth quarters," 

Which is better: public sector or private banks? On the PSU vs. private bank debate, he said that his approach is "very bottom-up" and that he has favorite stocks in both categories. He also acknowledged that PSU banks have outperformed private banks in terms of credit growth in the last few quarters. He noted that many large PSU banks are reporting growth of over 13–14%, while private banks are growing at around 10–11%. Asset quality remains "stable and strong" in both categories. PSU banks have also performed well in terms of margins, although he cautioned that future rate cuts could put greater pressure on PSU banks' margins.

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