India’s banking sector, as per a survey by FICCI and Indian Bank Association (IBA), is resilient with improved asset quality, strong capital buffers, robust retail and SME credit momentum, and early signs of revival in private capital expenditure. The sector maintains a positive credit growth outlook in the near term, backed by better balance sheets, steady economic activity, and sustained demand across various segments. Respondents anticipate a stable monetary policy in the coming months, indicating a well-calibrated framework balancing growth and inflation concerns.
Cooperative banks are the exception, with all respondents predicting a 25-basis point rate hike. Overall, banks foresee a favorable credit expansion scenario, with expectations of continued momentum in non-food credit. Public Sector Banks (PSB) are notably optimistic, driven by enhanced asset quality, stronger capital positions, and growing corporate lending traction.
Private banks are adopting a cautious credit growth approach, while foreign banks show moderate optimism due to their focused exposure to corporate and institutional sectors. Services and retail segments are anticipated to drive lending growth, with a strong outlook for the services sector supported by real estate, financial services, logistics, and tourism-related activities.
Around 46% of participants foresee non-food credit growth in the 11%-13% range, indicating a prevailing sentiment. Retail lending is expected to remain robust, playing a significant role in the sector’s growth. SME credit demand is projected to stay strong, reflecting high confidence in continued expansion, driven by improving business activity among smaller enterprises and policy support for MSME growth.
Cybersecurity risk emerges as a top concern for banks, as highlighted by the survey involving 24 banks, including public sector banks, private sector banks, foreign banks, small finance banks, and cooperative banks, conducted between January and February 2026.
