Early signs of recovery in loan disbursements in various retail and vehicle segments indicate a healthier credit cycle growth in India for FY27, as per a report by JM Financial Institutional Securities. Disbursement momentum in sub-segments increased by 6% and 35% year-on-year in H1 FY26 and Q2 FY26, respectively, compared to 3% and 11% growth in FY25.
Public sector banks saw a rise in market share in personal, home, and auto loans, while private banks strengthened their position in consumer durables, credit cards, and two-wheelers, the report highlighted. Personal loan disbursements surged by approximately 23% and 35% year-on-year in H1 FY26 and Q2 FY26, with PSBs witnessing a 77% increase in disbursements and their market share reaching 36% in Q2FY26.
Banks focused on larger loan sizes, with PSBs’ average disbursement ticket size growing by 29% year-on-year to Rs 7,17,000 in Q2 FY26, the report stated. Asset quality also improved, with the overall “Portfolio at Risk” (PAR) 31-90 declining to 1.6% in Q2 FY26, signaling positive trends in the sector.
Home loan disbursements showed growth of about 11% and 14% year-on-year in H1FY26 and Q2FY26, respectively, with PSBs capturing 50% of the origination value in the quarter. Loans above Rs 7.5 million constituted nearly 40% of the total value, according to the report.
Union Minister of Commerce and Industry Piyush Goyal praised public sector banks for their robust performance, emphasizing their role in supporting India’s growth alongside private and foreign banks. Goyal highlighted the banks’ profitability of around Rs 3 lakh crore last year, showcasing their ability to lend to trustworthy borrowers. He encouraged banks to lend responsibly, accelerate loan approvals with transparency, and offer support to MSMEs to leverage government schemes.
