New Delhi [India], April 29 (ANI): India’s banking sector is expected to sustain credit growth momentum in the coming quarters, even as the prevailing crisis in West Asia has tempered banker sentiment for the June quarter of Financial Year 2026–27, according to the Department of Economic Affairs’ Monthly Economic Review for April 2026.
While loan demand and the ease of terms have moderated, underlying financial stability indicators remain strong, supporting a positive outlook for FY27, the report stated. The trajectory of scheduled commercial banks’ (SCBs) credit has shown a consistent upward trend since May 2025, with growth accelerating to 17.1 percent year over year as of March 31, 2026, up from 11 percent a year earlier.
The expansion has been broad-based, with non-food credit rising 14.3 percent year over year in February 2026, compared with 11.1 percent in the same period of FY25. Among sectors, services led non-food credit growth at 16.3 percent in February 2026, up from 11.7 percent a year earlier. The surge was driven by sharp increases in shipping credit at 41.7 percent and computer software at 39.7 percent, compared with 8.1 percent and 22.3 percent, respectively, in February 2025.
Within industry, credit to the MSME sector remained robust at 27.5 percent, with micro and small enterprises recording a 30.4 percent jump, up from 9.6 percent in February 2025.
The total flow of resources to the commercial sector also strengthened, reaching Rs 44.7 lakh crore as of March 31, 2026, reflecting 38.2 percent year-over-year growth. This was largely driven by non-food bank credit, which rose to Rs 29.2 lakh crore from Rs 18.1 lakh crore a year earlier. Non-bank sources also contributed significantly, with corporate bond issuances up 123 percent and external commercial borrowings by non-financial entities rising 154.1 percent year over year.
However, the RBI’s Bank Lending Survey for Q4 FY26 indicates that the West Asia crisis has weighed on banker confidence. The net response for sector-wise loan demand fell from 50 percent in Q4 FY26 to 28.6 percent in Q1 FY27, while optimism on loan terms and conditions declined from 22.2 percent to 18.5 percent.
Despite this, bankers expect loan demand to remain positive and terms to stay easy for Q2 and Q3 FY27. The report noted that the West Asia situation is not expected to affect financial stability, with system-wide indicators for capital adequacy, liquidity, asset quality, and profitability remaining robust.
NBFCs also showed sound financial metrics, with total CRAR at 25.59 percent and Tier I CRAR at 23.72 percent as of December 2025, both well above regulatory requirements. The GNPA ratio improved to 2.14 percent from 2.52 percent a year earlier, underscoring resilience in the non-banking segment.
The data suggests that while geopolitical risks have introduced near-term caution, India’s credit ecosystem remains on a solid footing, with diversified growth across sectors and adequate buffers to support continued expansion in FY27. (ANI)
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