Bank lending has reclaimed its position as the dominant source of financing for India's commercial sector in FY26. According to the RBI's April bulletin, non-food bank credit surged to ₹29.2 lakh crore, lifting its share of total resource flows to 65.4% - the highest level in three years. This represents a dramatic shift from FY25, when bank credit had fallen to ₹18.1 lakh crore and its share dropped to 51.4%. The total resource flows reached ₹44.7 lakh crore in FY26, demonstrating the scale of the banking sector's recovery. The banking sector's resurgence comes as equity markets face significant volatility, with the Sensex declining 852.49 points to 77,664 and the Nifty falling 205.05 points to 24,173.05 in recent trading sessions.
The financing landscape showed mixed trends across different instruments. As reported by The Times of India, equity issuance lost ground, with its share declining from 10.8% in FY25 to 7.7% in FY26. In contrast, bond issuance increased from 5.6% to 6.8%, suggesting firms preferred longer-term debt financing even as they returned to banks. The rebound in bank credit was particularly pronounced, with the sector expanding by 61.5% in FY26 after falling from about ₹23 lakh crore in FY24 to ₹18.1 lakh crore in FY25.
The non-bank finance sector underwent significant changes during this period. According to the RBI data, foreign capital became more important, rising from 6.8% of total flows in FY24 to 11% in FY26, reaching ₹4.9 lakh crore. Meanwhile, domestic non-bank sources lost ground, with their share falling from 28.7% to 23.6% over the same period. By end-March 2026, outstanding bank credit stood at ₹219 lakh crore, representing a 16% year-on-year increase.
Other corporate funding instruments showed varied performance patterns. As reported by The Times of India, corporate bond issuance rose 52.4% in FY26 to ₹3 lakh crore from nearly ₹2 lakh crore. In contrast, commercial paper shrank by 57.8%, indicating weaker appetite for short-term funding. External commercial borrowings increased 66.2%, pointing to a revival in overseas debt. Foreign direct investment continued to climb, growing 11% in FY25 and accelerating to 31.3% in FY26, reaching ₹3.2 lakh crore.
The banking sector's recovery comes amid significant market volatility, with equity indices facing pressure from multiple factors. Brent crude surged for the fourth consecutive day to around $103 per barrel amid uncertainty over US-Iran talks and fresh concerns around the Strait of Hormuz. The Sensex declined 852.49 points to 77,664 and the Nifty fell 205.05 points to 24,173.05 in recent trading sessions, with HDFC Bank (down 1.93%) and ICICI Bank (down 1.47%) among the major index drags. Despite the market turbulence, the banking sector's dominance in resource flows continues to strengthen, providing stability in an otherwise volatile financial environment.
