India’s Credit Growth Surges 61% in FY26, Driven by Retail and MSMEs
Strong Demand Fuels Credit Expansion
New Delhi, March 26 – India’s credit growth experienced a significant surge in fiscal year 2026, increasing by 61 per cent, according to a new report released on Thursday. The growth was primarily fueled by robust demand from retail borrowers and micro, small, and medium enterprises (MSMEs).Total credit flows reached Rs 25.1 lakh crore, nearly matching deposit mobilization of Rs 26.1 lakh crore, as reported by Yes Bank.
Key Growth Drivers
The report identified strong demand across retail, MSME, and infrastructure sectors as the primary drivers of this accelerated growth. Retail loans continue to dominate, with personal loans increasing their share from 29 per cent to 33 per cent in recent years. Vehicle loans have surpassed housing loans as the largest contributor within this segment since the third quarter of fiscal year 2026, supported by tax relief measures and GST-related benefits.A notable shift towards secured lending is also evident, with growth in unsecured loans slowing.
MSME Sector Sees Strong Recovery
The industrial credit segment has shown a recovery, largely driven by MSMEs. The sector now accounts for nearly one-third of total industrial credit. Micro and small enterprises added Rs 2.38 lakh crore in loans during the year, while medium enterprises contributed Rs 63,000 crore.Rising Credit-Deposit Ratio
The credit-deposit (C/D) ratio has climbed to 82.4 per cent, marking its highest level in a decade, reflecting the increased lending activity. However, deposit growth has been slowing since fiscal year 2024, creating some liquidity pressure within the banking system.Outlook for FY27
Looking ahead, the report cautioned that credit growth may slow in fiscal year 2027. Potential risks include higher oil prices, weaker exports, and rising food inflation, which could impact economic activity and reduce loan demand. The fading impact of GST benefits is also expected to weigh on growth.Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
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