How Did Bank Credit Surge Over 7% in FY26 Driven by Retail Lending?
Synopsis
Bank credit in India has surged 7% to Rs 1,95,273 billion in FY26, primarily driven by retail lending, according to a report. This growth reflects strong demand, particularly in housing and MSME sectors, with public sector banks playing a crucial role. The outlook for bank credit remains optimistic, projecting 13-14% growth in FY27.
Key Takeaways
Bank credit rose by 7% to Rs 1,95,273 billion .
Retail loans are the primary driver of this growth.
Incremental credit for MSMEs has doubled.
Public sector banks are leading in credit disbursement.
Forecast for bank credit growth in FY27 is 13–14% .
New Delhi, Jan 6 (NationPress) The growth of bank credit in India has shown remarkable resilience, with gross banking credit (GBC) increasing by 7 percent to reach Rs 1,95,273 billion over the first eight months of FY26, as of the end of November. This surge is primarily attributed to retail loans, according to a report released on Tuesday.
The analysis from Crisil Intelligence highlights that secured retail lending, particularly in housing and gold loans, has constituted a larger portion of the new credit. Retail credit now represents approximately one-third of the total gross banking credit.
Meanwhile, the growth of unsecured loans has slowed down following the introduction of the Reserve Bank of India’s risk weight circular combined with stricter underwriting practices.
“Incremental credit to Micro, Small, and Medium Enterprises (MSMEs) has doubled, bolstered by public sector banks (PSBs), which have shown improvements in asset quality and their overall share in the outstanding credit,” the report noted.
The contribution of incremental credit for MSME loans rose to 32.5 percent from 17.7 percent compared to the previous year, with the share of MSMEs in outstanding credit increasing by 174 basis points, driven by strong disbursements from PSBs.
PSBs have also been pivotal in fostering credit growth in rural and semi-urban regions, reflecting a rise in rural demand.
The research firm indicates that high-value industrial loans have seen a contraction, suggesting a dip in capital expenditure, while the demand for working capital has remained stable, and credit to non-bank finance companies is showing signs of recovery after past regulatory slowdowns.
Additionally, the report states that the asset quality of PSBs has improved, with gross non-performing assets decreasing to 2.5 percent in September 2025, down from 2.8 percent in March 2025.
A recent analysis from SBI Mutual Fund forecasts bank credit growth to be in the range of 13–14 percent for FY27. Bank credit has increased from 9 percent in May to 11.4 percent by November 2025, with overall credit anticipated to grow by 10.5–11 percent in FY26.
Household credit is expected to surpass corporate credit, according to the fund house, noting that sectors reliant on credit-driven demand and premiumization trends are likely to outperform in the near future.
Point of View
It's essential to recognize the implications of this rising bank credit. The resilience shown in retail lending and the doubled support for MSMEs highlights a positive trend for economic growth. However, it is crucial to remain cautious about the balance between secured and unsecured lending as market dynamics continue to evolve. Our commitment to informing the public remains steadfast.
NationPress
3 Aug 2026
Frequently Asked Questions
What is the current growth rate of bank credit in India?
Bank credit in India has risen by 7% to Rs 1,95,273 billion in the first eight months of FY26.
What factors are driving the increase in bank credit?
The increase is primarily driven by retail loans, particularly housing and gold loans.
How are MSMEs impacted by the current bank credit growth?
Incremental credit to MSMEs has doubled, significantly supported by public sector banks.
What is the forecast for bank credit growth in FY27?
Bank credit is projected to grow by 13–14% in FY27.
How has the asset quality of public sector banks changed?
The asset quality of PSBs has improved, with gross non-performing assets decreasing to 2.5%.
