India's Banking Sector Shows Resilience with Strong Credit Growth Outlook

The survey from FICCI and Indian Bank Association (IBA) said the banking sector maintains a broadly constructive outlook on credit growth over the near term, supported by improving balance sheets, steady economic activity, and sustained demand across multiple segments of the economy.

Respondents expect current monetary policy to remain broadly stable in the coming months, suggesting that the existing policy framework remains appropriately calibrated to balance growth and inflation considerations.

Only cooperative banks stood, with all respondents expecting a 25-basis point rate increase.

Expectations regarding overall credit expansion remain positive, with banks anticipating continued momentum in non-food credit, the report said.

Public Sector Banks (PSB) appear particularly confident in the outlook, reflecting improved asset quality, stronger capital positions, and increasing traction in corporate lending.

Private banks demonstrated a balanced and selective approach to credit growth, while foreign banks displayed moderate optimism consistent with their focused exposure to corporate and institutional segments, the report noted.

Sectorally, credit demand from services and retail segments is expected to remain a key driver of overall lending growth. The services sector outlook reflected strong expectations of expansion, supported by activity in real estate, financial services, logistics, and tourism-related industries.

Around 46 per cent of participants expect overall non-food credit growth in the 11 per cent-13 per cent range, making it the dominant view.

Retail lending is also projected to remain robust, reinforcing its role as a central pillar of banking sector growth.

SME credit demand is expected to remain particularly strong, with respondents expressing high confidence in continued expansion in this segment. This reflects improving business activity among smaller enterprises, increased formalisation of credit channels, and continued policy emphasis on supporting MSME growth, the report noted.

Banks reported cybersecurity risk as the most pressing challenge confronting them. As many as 24 banks, comprising public sector banks, private sector banks, foreign banks, small finance banks, and cooperative banks, participated in the survey conducted between January and February 2026.

- IANS