Private banks in India are very positive about future credit growth, driven by strong demand from retail, small businesses (SME), industrial, and services sectors.
This optimism comes despite challenges like limited deposits and broader economic uncertainties.
A recent FICCI-IBA Bankers’ Survey, covering July to December 2026, reveals that nearly nine out of ten private banks expect credit to grow by mid-teens or even higher. Public sector banks also share this positive view, with about three-fourths expecting similar growth. Foreign banks, however, project a slightly lower double-digit expansion.
The survey highlights that India’s banking sector remains strong, supported by better asset quality, more capital, and continued growth in retail and SME lending. There are also early signs of increased private sector investment. This positive outlook is set against the backdrop of India’s economy growing at 7.8% in Q1 FY2026-27, with significant increases in investment and consumption.
Retail and SME loans are still the main drivers of credit expansion, with over 80% of banks predicting strong double-digit growth in these areas. Industrial loans, particularly for infrastructure, engineering, and auto sectors, are also expected to remain robust. In services, non-banking financial companies, tourism, hotels, and real estate are leading the demand for term loans.
However, a key challenge identified by two-thirds of the banks is slower deposit growth compared to credit demand. This shortage of deposits is seen as the biggest hurdle to maintaining healthy credit expansion, especially by public sector banks. Geopolitical risks and supply chain disruptions are also major concerns affecting private sector investment. For the upcoming financial year, banks are prioritizing deposit collection, strengthening their liability base, and focusing on artificial intelligence, data-driven banking, and cybersecurity.