Bank credit growth accelerated in FY 2025–26, with non-food credit rising 15.9%, up from 10.9% in the previous year. Total outstanding credit reached ₹212.9 lakh crore, reflecting a strong increase in lending activity.
The expansion was broad-based, led by the services sector, followed by personal loans, agriculture, and industry. This pattern suggests both consumption demand and investment activity are supporting the credit cycle.
A key shift was in industrial lending, where credit growth nearly doubled to 15.0%, driven primarily by a sharp 33.1% rise in lending to Micro and Small enterprises. This indicates a revival in smaller firm activity alongside larger infrastructure-linked sectors such as metals, chemicals, and energy.
Credit to agriculture and allied activities also strengthened, rising to 15.7%, reflecting sustained rural demand and increasing formalisation of credit channels.
The credit cycle points to a more balanced recovery, supported by improved bank balance sheets and lower levels of stressed assets, enabling stronger transmission of lending across sectors.
Sectoral Credit Deployment Benchmarks (y-o-y %)
Services Sector: Recorded the highest expansion at 19.0%, driven by NBFCs, trade, and commercial real estate.
Personal Loans: Grew by 16.2%, with strong momentum in vehicle and gold-backed loans.
Agriculture & Allied: Accelerated to 15.7%, up from 10.4% in the previous year.
Industrial Sector: Expanded by 15.0%; specifically, Micro and Small industries grew at 3.7 times the previous year's rate.
Key Industrial Drivers: Infrastructure, Chemicals, Basic Metals, and Petroleum/Coal products.
What is a "Scheduled Commercial Bank"?
A Scheduled Commercial Bank is a financial institution included in the Second Schedule of the RBI Act, 1934. To qualify for "scheduled" status, a bank must satisfy the RBI that its affairs are not being conducted in a manner detrimental to the interests of its depositors.
Eligibility: The bank must have a paid-up capital and reserves of an aggregate value of at least ₹5 lakh.
Benefits: Being a scheduled bank entitles the institution to borrow from the RBI at the bank rate and gives it "clearing house" membership.
Types: This category includes Public Sector Banks, Private Sector Banks, Foreign Banks operating in India, and Regional Rural Banks (RRBs)
Policy Relevance
Signals Industrial Rebound: The near-doubling of industrial credit growth indicates a strong return of corporate confidence and a pickup in the domestic Capex cycle.
Empowers MSMEs: The 33.1% surge in credit to Micro and Small industries suggests that formalisation efforts are successfully reaching the grassroots level of the economy.
Sustains Rural Economy: Accelerated credit to agriculture (15.7%) supports long-term food security and reinforces rural purchasing power.
Demonstrates Banking Resilience: Sustained profitability and well-capitalized balance sheets position Indian banks as the primary engine for future economic growth.
Mitigates Global Headwinds: Strong domestic credit demand provides a buffer against global geo-economic fragmentation and external pressures.
Relevant Question for Policy Stakeholders: Given the 3.7-fold increase in credit growth for Micro and Small industries, what targeted regulatory measures can ensure this liquidity translates into long-term fixed asset creation rather than just short-term working capital?
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