NewKerala.com

India's Credit Growth Soars 61% in FY26, Driven by Retail and MSME Demand

India's credit growth accelerated sharply by 61% in the 2025-26 financial year, reaching Rs 25.1 lakh crore, largely fueled by robust demand from retail borrowers and MSMEs. Retail loans, particularly vehicle financing, have become the dominant driver, surpassing housing loans, while MSMEs led a significant recovery in industrial credit. However, the rapid credit expansion has pushed the credit-deposit ratio to a ten-year high of 82.4%, as deposit growth has been slowing. The report cautions that credit growth may moderate in FY27 due to risks like higher oil prices, weaker exports, and fading GST benefits.

Key Points: India's FY26 Credit Growth Jumps 61%, Report Shows

  • Credit growth surges 61% in FY26
  • Retail loans dominate, led by vehicle financing
  • MSME sector drives industrial credit recovery
  • Credit-deposit ratio hits decade-high of 82.4%
  • Growth may slow in FY27 due to economic risks
2 min read

India credit growth surges 61 pc in FY26: Report

India's credit growth surged 61% in FY26 to Rs 25.1 lakh crore, driven by retail and MSME loans, though deposit slowdown poses risks.

"Credit growth in India has accelerated significantly in FY26, with total credit flows rising to Rs 25.1 lakh crore - Yes Bank Report"

New Delhi, March 26

India's credit growth has seen a sharp jump in FY26, rising 61 per cent, driven mainly by strong demand from retail borrowers and MSMEs, a new report showed on Thursday.

Credit growth in India has accelerated significantly in FY26, with total credit flows rising to Rs 25.1 lakh crore, nearly matching deposit mobilisation of Rs 26.1 lakh crore, a report by Yes Bank said.

The report noted that strong demand across retail, MSME and infrastructure sectors has been the key driver of this growth.

However, deposit growth has been slowing since FY24, creating some pressure on liquidity in the banking system.

As a result, the credit-deposit (C/D) ratio has climbed to 82.4 per cent, its highest level in a decade.

Retail loans continue to dominate credit growth. Personal loans have seen their share rise from 29 per cent to 33 per cent in recent years, supported by tax relief measures and GST-related benefits that have boosted household incomes.

Within this segment, vehicle loans have emerged as the biggest driver, overtaking housing loans since the third quarter of FY26.

There is also a noticeable shift towards secured lending as growth in unsecured loans has slowed.

The report also highlighted a recovery in industrial credit, led by MSMEs. The segment now accounts for nearly one-third of total industrial credit and has seen strong growth due to government support, including credit guarantee schemes and revised MSME definitions.

Micro and small enterprises alone added Rs 2.38 lakh crore in loans during the year, while medium enterprises contributed Rs 63,000 crore, the report said.

Looking ahead, the report cautioned that credit growth may slow in FY27 due to several risks.

Higher oil prices, weaker exports and rising food inflation could impact economic activity and reduce demand for loans.

At the same time, the fading impact of GST benefits may also weigh on growth, the report stated.

- IANS

Share this article:

Reader Comments

P
Priya S
While the growth numbers look impressive, the slowing deposit growth is a bit worrying. A C/D ratio of 82.4% is quite high. Banks need to be careful about liquidity. Hope RBI is keeping a close watch.
R
Rohit P
Vehicle loans overtaking housing loans is interesting! Shows people are prioritizing mobility and perhaps the dream of owning a car is becoming more achievable than a house in metros. The shift to secured lending is a sensible correction by banks.
S
Sarah B
As someone who runs a small business, the government's credit guarantee schemes have been a lifeline. That Rs 2.38 lakh crore for micro and small enterprises isn't just a number - it's thousands of businesses surviving and growing. More power to MSMEs!
V
Vikram M
The caution about FY27 is valid. We can't ignore the risks of oil prices and food inflation. The GST benefits fading will also hit household budgets. Growth is good, but sustainable growth is what we need for the long run.
K
Kavya N
Personal loans at 33% share... hope people are borrowing responsibly and not just for lifestyle inflation. Easy credit is a double-edged sword. Banks must ensure proper due diligence even in a growth phase.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50