Credit growth in India’s banking system is expected to pick up pace in the coming fiscal year — but with an uneven pattern across segments. According to Surinder Kumar Thapar, a senior advisor at the Indian Banks Association, lenders are likely to see robust expansion in credit to the retail and MSME (micro, small and medium enterprises) sectors in FY27 (April 2026–March 2027), even as corporate lending is anticipated to remain relatively normal or moderate amid ongoing global uncertainties.
Speaking at the 6th PICUP Fintech Conference jointly organised by IBA and FICCI, Thapar noted that individual and small-business loans have shown consistent momentum, reflecting strong consumer demand and improved lending processes. Banks have increasingly streamlined digital onboarding and customer evaluation tools, bolstering retail and MSME loan portfolios without significant stress, he said.
Why Retail and MSME Credit Looks Strong
- Improved digital processes — Banks now use advanced data analysis and digital screening tools to evaluate customer creditworthiness more accurately, reducing credit risk in retail and MSME segments.
- Asset quality gains — Thapar highlighted that asset quality has improved significantly in recent years, particularly in retail loans, helping banks extend more credit with confidence.
- Co-lending initiatives — Collaboration between banks and non-bank lenders has broadened credit access to underserved areas such as remote regions and informal markets, supporting growth in MSME financing.
These factors point to sustained credit demand from consumers and small enterprises, whose borrowing often supports consumption and local economic activity.
Corporate Lending Seen as More Measured
On the corporate front, Thapar said geopolitical tensions and external pressures could temper loan appetite. As global uncertainties persist, large firms may rely more on internal cash flows or alternative financing instead of bank credit, leading to normal or moderate growth in corporate lending — not a contraction, but not an acceleration either.
This view aligns with other industry forecasts that suggest credit growth overall may moderate modestly in FY27 compared with recent high rates, even as bank credit continues to expand. Some projections estimate credit growth at around 12–13 per cent, supported by strong demand in retail and MSME segments, while corporate loan growth remains steady amid global pressures.
Deposits and Other Dynamics
Thapar also pointed out that deposit growth remains under pressure as savers shift toward alternative investment options such as mutual funds, ETFs and capital markets. That could put some strain on traditional bank funding, although deposits continue to grow at reasonable rates.
Overall, the banking sector appears well-positioned for another year of healthy lending, with retail and MSME loans leading credit growth, while moderately paced corporate lending reflects caution in an uncertain global environment.