India's banking system has maintained its strong credit growth momentum, with bank credit from Scheduled Commercial Banks (SCBs) reaching ₹226 lakh crore as of 15 August 2026, rising approximately 18.60% year-on-year, according to the latest data released by the Reserve Bank of India. The fortnightly growth stood at 0.12%, indicating sustained momentum in the banking sector. Latest data from the RBI shows bank credit continued to expand at a robust pace in July, with overall bank credit rising 19.3% year-on-year, supported by strong lending growth across industry, services, agriculture and personal loans. This growth rate aligns closely with the 16.5% year-on-year credit growth reported in June 2026, demonstrating consistent expansion in bank lending activities across the system. The June 2026 credit growth represents a significant acceleration from 9.9% recorded in the corresponding period of the previous year, indicating strengthening economic activity and healthy lending demand.
The industrial credit landscape has witnessed a dramatic transformation, with industrial credit growth accelerating to 20% year-on-year in July 2026, sharply higher than the 6.5% growth recorded in the corresponding fortnight of the previous year. According to the RBI's latest sectoral deployment data, credit to micro and small industries grew 22.6%, while lending to medium industries increased 30.5% and large industries 17.7%, indicating broad-based expansion across all industrial segments. Among major industrial segments, credit to all engineering grew the fastest at 36.2% year-on-year, with industries other than electronics expanding 40.1% and electronics rising 22.8%. Credit to gems and jewellery increased 35.7%, while advances to petroleum, coal products and nuclear fuels grew 34%. Lending to vehicles, vehicle parts and transport equipment rose 32.2%, and credit to chemicals and chemical products grew 24%. Construction credit grew 24.4% and credit to food processing increased 22.3%, while textiles recorded a more moderate 15.1% growth.
The credit landscape shows mixed trends across different loan categories, with gold loans continuing to see strong expansion, with lending against gold jewellery growing 88.1% year-on-year in July 2026, down from 136.4% growth in the year-ago period, indicating selective lending patterns among different loan products. However, this 88.1% growth in gold loans represents a significant moderation from the previous year's 136.4% growth, highlighting the sector's continued attractiveness to borrowers and lenders alike. This 136.4% growth in gold loans represents a significant acceleration from the previous year's 88% growth, highlighting the sector's continued attractiveness to borrowers and lenders alike. The moderation suggests banks are becoming more selective in their gold loan exposure while maintaining strong appetite for gold-backed lending.
The retail credit segment has shown mixed performance, with overall retail credit growing 16.2% during July 2026, while some segments recorded slower growth than a year earlier. Credit card outstanding growth moderated to 2.3% from 5.6%, and education loan growth slowed to 13.7% from 15%. However, vehicle loans increased 18.8% and housing credit grew 11.3%, while consumer durable loans remained almost flat, growing 0.4%, though this was an improvement from a 5.8% contraction a year earlier. Services credit also recorded a sharp acceleration, growing 22.9% in July compared with 10.2% a year earlier, supported by faster expansion in lending to non-banking financial companies (NBFCs) which grew 35.7%, computer software (43.3%), tourism, hotels and restaurants (27.1%), and shipping and aviation (25.9% and 23.8% respectively).
The agriculture and allied activities sector has shown strong momentum, with credit to agriculture and allied activities growing 17% in July 2026, significantly higher than the 7.3% growth seen in the corresponding fortnight of the previous year. Infrastructure credit grew at a slower pace of 10.2%, with credit to ports surging 58.4% and power rising 21.6%, while lending to roads declined 0.8% and telecommunications contracted 13.2%. The RBI's sectoral deployment data covers scheduled commercial banks accounting for about 95% of total non-food credit, providing comprehensive coverage of the banking sector's lending activities across all major sectors.
Looking ahead, India Ratings expects the 19% credit growth pace to moderate in the second half of FY27 as the current drivers lose momentum, with the agency maintaining a neutral outlook on the banking sector. The agency does not see a meaningful asset-quality problem in banks at present, with gross non-performing assets below 0.5% and corporate borrowers yet to show broad-based signs of stress. However, the bigger concern is that banks are generating growth at lower returns. On NBFCs, the agency expects overall growth of 15-16% in FY27, with larger, well-capitalized players growing around 20%, though asset-quality risks remain concentrated in commercial vehicles, micro-loans against property (LAP), and unsecured lending. Despite elevated LDRs, bank margins have remained broadly stable as rates on fresh loans and term deposits have largely stabilised, while lower certificate of deposit rates and reduced issuance have provided relief on funding costs.
