Bank credit growth in India has remained strong, with gross banking credit reaching Rs 195,273 billion in the first eight months of FY26, marking a 7% increase, according to a report by Crisil Intelligence. The rise has been primarily fueled by retail loans, especially secured retail lending like housing and gold loans, which contributed significantly to the incremental credit.
The report highlighted that retail credit now makes up about one-third of the total gross banking credit. While unsecured loan growth has slowed down due to regulatory changes by the Reserve Bank of India, there has been a notable surge in incremental credit to Micro, Small, and Medium Enterprises (MSMEs), doubling with support from public sector banks (PSBs).
Notably, the share of incremental credit towards MSME loans has risen significantly to 32.5% from 17.7% a year earlier, with PSBs playing a crucial role in this growth. PSBs have also been instrumental in driving credit growth in rural and semi-urban areas, reflecting an increase in rural demand and economic activity.
The research firm also observed a decline in high-ticket industrial loans, signaling subdued capital expenditure trends. However, working capital demand has remained stable, and there are signs of a revival in credit to non-bank finance companies following a period of regulatory constraints. Additionally, PSBs have shown improvement in asset quality, with gross non-performing assets reducing to 2.5% in September 2025 from 2.8% in March 2025.
According to a recent report by SBI Mutual Fund, bank credit growth is expected to reach 13-14% in FY27. The report noted a rise in bank credit from 9% in May to 11.4% by November 2025, with aggregate credit likely to grow by 10.5-11% in FY26. Household credit is anticipated to outpace corporate credit, especially in segments driven by credit demand and premiumization trends.
