Daijiworld Media Network - New Delhi

New Delhi, Jan 6: Bank credit growth in India remained steady during the first eight months of FY26, with gross banking credit (GBC) rising 7 per cent to Rs 1,95,273 billion by the end of November, supported largely by retail lending, according to a report released on Tuesday.

Crisil Intelligence noted that secured retail loans, particularly housing and gold loans, formed a significant portion of incremental credit during the period. Retail lending now accounts for nearly one-third of total gross banking credit. At the same time, growth in unsecured loans slowed following the Reserve Bank of India’s increase in risk weights and stricter lending standards adopted by banks.

The report highlighted a sharp rise in lending to micro, small and medium enterprises (MSMEs), with incremental credit to the segment doubling compared to last year. Public sector banks (PSBs) played a key role in this expansion, aided by improvements in asset quality and a higher share in overall outstanding credit.

The proportion of incremental credit flowing to MSMEs jumped to 32.5 per cent from 17.7 per cent a year earlier. Additionally, MSMEs’ share in total outstanding credit rose by 174 basis points, driven mainly by strong disbursements from PSBs.

Public sector banks also led credit expansion in rural and semi-urban regions, pointing to a pickup in rural demand. In contrast, large-ticket industrial loans declined, reflecting subdued capital expenditure activity. Working capital demand remained stable, while lending to non-banking financial companies showed early signs of recovery after a period of regulatory tightening.

Crisil further noted an improvement in PSBs’ asset quality, with gross non-performing assets falling to 2.5 per cent in September 2025 from 2.8 per cent in March 2025.

Looking ahead, a recent report by SBI Mutual Fund projected bank credit growth of 13–14 per cent in FY27. Overall credit growth rose from 9 per cent in May to 11.4 per cent by November 2025, with aggregate bank credit expected to expand by 10.5–11 per cent in FY26.

The fund house also said household borrowing is likely to grow faster than corporate credit, adding that sectors dependent on credit-led consumption and premiumisation trends are expected to perform better in the near term.