Indian banking sector is expected to maintain strong credit growth of 11-13% in the first half of 2026, with retail lending emerging as the primary driver, according to the latest FICCI–IBA Bankers’ Survey.

Key Highlights

• Indian banking sector to sustain 11-13% credit growth in H1 2026, retail lending leads.
• AI disruption, cybersecurity risks rise as renewable financing emerges key banking opportunity in India.

The survey, covering 24 banks across public, private, foreign, and cooperative segments, highlights a resilient credit demand environment, supported by improving asset quality, stable economic activity, and sustained lending across retail, SME, and services sectors.

FICCI–IBA Bankers’ Survey

Credit Growth Outlook: Around 46% of banks expect non-food credit growth in the 11–13% range, while 29% foresee growth above 13%, indicating broad-based optimism.

Limited Downside Risk: Only 8% of respondents expect credit growth below 9%, reflecting strong confidence despite global uncertainties.

Economic Support Factors: Growth is underpinned by healthy balance sheets, steady GDP expansion, and improved capital buffers.

Retail lending is expected to remain the core growth engine, with 52% of banks projecting retail loan growth above 13% No banks expecting growth below 9%. At the same time, SME lending is set to maintain strong double-digit growth, driven by improving business sentiment and policy support for small enterprises.

Credit demand across sectors is expected to remain strong, with the services sector emerging as a key growth driver, supported by robust activity in commercial real estate, NBFCs, tourism, and logistics. Industrial credit, however, is likely to expand at a moderate pace of 9–13%, reflecting a gradual recovery in private capital expenditure (capex) rather than a sharp investment cycle. Meanwhile, term loan demand is expected to be led by infrastructure, real estate, auto components, and pharmaceuticals, indicating sustained momentum in core and consumption-linked sectors.

On the policy front, most banks anticipate that the interest rate environment will remain stable through mid-2026, suggesting that the current monetary stance is considered well-calibrated to balance economic growth and inflation.

The survey also points to a structural shift in the Indian banking sector, driven by rapid technological adoption and emerging risks. Artificial intelligence (AI) is expected to play a transformative role in credit underwriting, risk assessment, and collections, significantly improving efficiency and decision-making.

Also Read: India Banking Sector Hits 2-Year High in Credit and Deposit Growth

Credit demand across sectors is expected to remain strong, with the services sector emerging as a key growth driver, supported by robust activity in commercial real estate, NBFCs, tourism, and logistics. Industrial credit, however, is likely to expand at a moderate pace of 9–13%, reflecting a gradual recovery in private capital expenditure (capex) rather than a sharp investment cycle. Meanwhile, term loan demand is expected to be led by infrastructure, real estate, auto components, and pharmaceuticals, indicating sustained momentum in core and consumption-linked sectors.

On the policy front, most banks anticipate that the interest rate environment will remain stable through mid-2026, suggesting that the current monetary stance is considered well-calibrated to balance economic growth and inflation.

The survey also points to a structural shift in the banking sector, driven by rapid technological adoption and emerging risks. Artificial intelligence (AI) is expected to play a transformative role in credit underwriting, risk assessment, and collections, significantly improving efficiency and decision-making. At the same time, cybersecurity has emerged as the most pressing concern for banks, highlighting the growing risks associated with digital expansion. Additionally, renewable energy financing is gaining traction as a major opportunity within sustainable finance, reflecting the sector’s increasing focus on green investments and long-term sustainability.