Are We Witnessing a Recovery in Loan Disbursement and Credit Growth in India for FY27?
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Synopsis
Recent reports unveil promising signs of recovery in loan disbursements within India's retail and vehicle sectors, indicating a healthy growth trajectory in the country's credit market for FY27. With significant gains by public sector banks and increasing asset quality, this development could reshape financial lending dynamics.
Key Takeaways
- Loan disbursements show early recovery signs.
- Public sector banks gain market share in key segments.
- Asset quality improves with lower Portfolio at Risk.
- Home loan disbursements grow significantly.
- Minister Goyal advocates for responsible lending.
New Delhi, Dec 23 (NationPress) Initial indicators of recovery in loan disbursements across various retail and vehicle sectors suggest a more robust credit growth cycle in India for FY27, according to a report released on Tuesday.
The analysis from JM Financial Institutional Securities highlighted that disbursement momentum in different sub-segments increased by 6 per cent and 35 per cent year-on-year in H1 FY26 and Q2 FY26, respectively, in contrast to growth rates of 3 per cent and 11 per cent YoY in FY25.
Public sector banks (PSBs) have captured a larger share in personal, home, and auto loans, whereas private banks have gained ground in consumer durables, credit cards, and two-wheelers, the report detailed. Personal loan disbursements surged approximately 23 per cent and 35 per cent YoY in H1 FY26 and Q2 FY26, respectively, with PSBs witnessing a remarkable 77 per cent increase in their disbursements, which pushed their market share by value to 36 per cent in Q2FY26.
Financial institutions are prioritizing larger loan amounts, with the average disbursement ticket size for PSBs rising by 29 per cent YoY to Rs 7,17,000 in Q2 FY26, as per the findings.
Asset quality has shown improvement, with the overall 'Portfolio at Risk' (PAR) for 31-90 days declining to 1.6 per cent in Q2 FY26, the report indicated.
Home loan disbursements experienced growth of about 11 per cent and 14 per cent YoY in H1FY26 and Q2FY26 respectively, with PSBs claiming 50 per cent of the origination value in the last quarter. Loans exceeding Rs 7.5 million comprised nearly 40 per cent of the total value, as stated in the report.
In related news, Union Minister of Commerce and Industry Piyush Goyal remarked that public sector banks have emerged as formidable and competitive entities, standing alongside private and foreign banks in fostering India’s growth trajectory.
He noted that banks reported profits nearing Rs 3 lakh crore last year, showcasing their ability to lend to responsible borrowers. Goyal encouraged banks to adopt a liberal yet responsible lending approach, expedite and enhance the transparency of loan approvals, and provide essential capital and guidance to MSMEs so they can effectively utilize government schemes.
Point of View
I believe the positive trends in loan disbursement and credit growth are critical indicators of India's economic resilience. The proactive stance of public sector banks amidst a recovering market not only fosters consumer confidence but also supports the broader economic goals of the nation. We must continue to encourage responsible lending practices that empower both individuals and businesses.
NationPress
09/01/2026
Frequently Asked Questions
What is the current trend in loan disbursements in India?
Recent reports indicate a recovery in loan disbursements across various retail and vehicle segments, suggesting healthier credit growth in India for FY27.
How have public sector banks performed in loan disbursements?
Public sector banks have increased their market share in personal, home, and auto loans, significantly boosting their disbursements by 77% in Q2 FY26.
What does the report say about asset quality?
The report highlights an improvement in asset quality, with the 'Portfolio at Risk' declining to 1.6% in Q2 FY26.
How are home loan disbursements trending?
Home loan disbursements grew about 11% and 14% YoY in H1 FY26 and Q2 FY26, respectively, with PSBs capturing 50% of origination value.
What is the significance of these trends?
These trends indicate a resilient credit cycle that can potentially spur economic growth and improve lending dynamics, especially for MSMEs.
