India’s credit growth in FY26 witnessed a significant 61% increase, reaching Rs 25.1 lakh crore, closely aligning with deposit mobilization of Rs 26.1 lakh crore, as per a report by Yes Bank. The surge in credit was primarily fueled by robust demand from retail borrowers and MSMEs, with strong performance in retail, MSME, and infrastructure sectors driving this growth momentum. Notably, the credit-deposit ratio has soared to 82.4%, marking its highest level in a decade, as deposit growth has decelerated since FY24, impacting liquidity in the banking system.
Retail loans have been a major contributor to the credit expansion, with personal loans witnessing a rise in market share from 29% to 33%, supported by tax benefits and GST-related advantages that have bolstered household incomes. Vehicle loans have emerged as the primary growth driver within this segment, surpassing housing loans since the third quarter of FY26. Moreover, there has been a shift towards secured lending, with a slowdown in unsecured loans growth.
The report also highlighted a resurgence in industrial credit, particularly driven by MSMEs, which now constitute nearly one-third of total industrial credit. The MSME segment has experienced substantial growth, supported by government initiatives such as credit guarantee schemes and revised MSME definitions. During the year, micro and small enterprises alone added Rs 2.38 lakh crore in loans, while medium enterprises contributed Rs 63,000 crore to the credit growth.
Looking forward, the report cautioned that credit growth might decelerate in FY27 due to various risks, including higher oil prices, weakened exports, and escalating food inflation that could dampen economic activity and reduce loan demand. Additionally, the diminishing impact of GST benefits may further impede growth prospects.
