New Delhi: The latest Ficci-IBA Bankers’ Survey has signalled a steady, if unspectacular, recovery in India’s industrial credit cycle, projecting growth of 9-13% for January-June this year. The report suggests that while a sharp acceleration remains unlikely, a gradual expansion is under way, supported by a revival in capital expenditure, sustained infrastructure push, and improving sectoral demand.
Industrial credit trends vary sharply across banking segments. Small finance banks and cooperative banks are expected to post relatively modest growth of 7-9%, reflecting a conservative stance driven by limited exposure to large industrial borrowers and a stronger focus on retail and MSME lending. Public-sector banks, by contrast, display stronger optimism, buoyed by improved asset quality, strengthened capital buffers, and renewed traction in corporate lending amid early signs of a capex revival.
Private banks present a more nuanced picture, with expectations spread across growth bands, indicating a selective yet growth-oriented approach anchored in calibrated risk management. Foreign banks, meanwhile, are projected to see industrial credit growth in the 11-13% range, reflecting moderate optimism shaped by global liquidity conditions, capital allocation strategies, and selective participation in India’s corporate credit market.
Retail, SME Lending Drive Momentum
Beyond industrial credit, the Ficci-IBA report underscores a broader resilience in India’s banking system, with overall credit growth expected to remain in the 11-13% range in the first half of 2026. Retail lending is emerging as the primary engine of expansion, with more than half of lenders anticipating growth exceeding 13%. Notably, no respondents expect retail credit growth below 9%, underscoring the segment’s structural strength.
The survey, covering 24 banks across categories, reveals that 46% of respondents expect non-food credit growth between 11-13%, while 29% foresee expansion above 13%. Only 8% anticipate growth below 9%, highlighting broad-based confidence despite global uncertainties. The report notes that the sector maintains a “broadly constructive outlook on credit growth over the near term,” supported by resilient economic activity and strengthening balance sheets.
SME lending is also expected to sustain strong double-digit growth, reflecting improving business sentiment and continued policy support. Credit demand from the services sector remains robust, with expectations of double-digit expansion led by commercial real estate, non-banking financial companies (NBFCs), tourism, and logistics.
Infrastructure & Capex Lead Loan Demand
Sectoral trends point to a capex-heavy recovery, with infrastructure — spanning power, roads and telecom — emerging as the dominant driver of term loan demand over the next six months. Metals, iron and steel, real estate and construction follow closely, alongside auto and auto components, pharmaceuticals, textiles and engineering goods.
Additional sectors such as power, ports, defence and data centres are also expected to witness strong demand for term loans, reflecting a broader investment-led growth cycle. In contrast, chemicals (excluding pharma), leather and leather products, and rubber and plastics have received comparatively fewer mentions.
Commercial real estate leads among services sectors in term loan demand, followed by NBFCs and tourism, hotels and restaurants. Shipping and aviation also feature prominently. The report highlights that the outlook for term loan demand in the next six months appears “capex-heavy and infrastructure-led, with strong support from real estate and manufacturing-linked sectors”, adding that investment-led growth is taking precedence over consumption-driven sectors.
On the working capital side, textiles are expected to lead demand, followed by auto and auto components, pharmaceuticals, engineering goods and food processing. In services, trade (wholesale and retail) is projected to see the strongest growth, alongside transport operators and tourism-related sectors, with NBFCs and professional services completing the top five.
Stable Rates, Structural Shifts Ahead
On the policy front, banks expect interest rates to remain unchanged through June 2026, with the report noting a “strong consensus toward maintaining current policy rates”, indicating confidence in the existing monetary stance.
Agriculture and allied sector credit is projected to grow in the 9-13% range, reflecting stable rural demand. At the same time, nearly 71% of respondents expect industrial credit growth within the 9-13% band, reinforcing the narrative of a gradual rather than sharp capex recovery.
The survey also points to deeper structural changes reshaping the banking landscape. Nearly 48% of respondents identify AI-driven credit underwriting and collections as the most disruptive force in 2026, with AI expected to “fundamentally reshape risk assessment, customer onboarding and recovery mechanisms”. Cybersecurity has emerged as the most pressing challenge, cited by 71% of banks.
Meanwhile, renewable energy financing stands out as the most significant opportunity in sustainable finance, backed by 83% of respondents.
The banking sector is “reasonably optimistic about credit growth”, even as it navigates technological disruption, evolving risk dynamics and the demands of a transitioning economy, says the report.
(Cover photo courtesy Unsplash)