Indian banks' non-food credit demonstrated exceptional momentum, expanding at 16.2% year-on-year through May 15, 2026, marking the fastest growth since June 2024, according to the latest RBI data. This represents a significant acceleration from the 15.8% growth recorded in April 2026, with the credit-to-deposit ratio standing at approximately 400 basis points - the widest gap in about two years. The RBI collected data from 41 select banks that together account for about 95% of total non-food credit by all commercial banks, providing comprehensive insights into sectoral credit deployment patterns. On a sequential basis, credit contracted 0.1% during the fortnight, while deposits declined 0.7%, indicating continued strength in lending demand despite prevailing geopolitical uncertainties.
Credit to industry sectors recorded 15.1% YoY growth in April 2026, marking a significant acceleration from the 7% growth recorded in the year-ago period. As per the latest RBI data, large industries' outstanding loans doubled to 10% from 5% in the corresponding period last year, while micro and small industries rose 30.1% compared with 9.2% growth last year. However, medium industries exhibited steady growth on a year-on-year basis, with the overall industrial credit growth supported by robust expansion in infrastructure, metals, engineering, petroleum, and chemical sectors. Among major industries, outstanding credit to infrastructure, basic metal and metal product, all engineering, petroleum, coal products and nuclear fuels, and chemical and chemical products marked higher year-on-year growth. Construction, textiles, and rubber segments witnessed marginally subdued credit growth during the period.
Loans against gold jewellery continued to record the sharpest expansion in the personal loans segment, with month-on-month growth moderating to 5.9% as against 7.1% growth recorded in the year-ago period. The outstanding bank gold loans stood at ₹4.9 lakh crore, maintaining their position as a key growth driver in the personal credit segment. However, retail loan growth stood at 16% YoY, driven largely by gold loans which recorded growth of more than 120%, according to the latest RBI data. This sustained momentum in gold loans contrasts with the broader trend of moderating credit growth across other segments, though the personal loans segment overall recorded 16% year-on-year growth compared to 11.9% in the previous year. The RBI noted that while segments such as vehicle loans and housing sustained robust credit growth, credit card outstanding moderated during the period.
The services sector emerged as the fastest-growing segment, registering 18.6% YoY growth compared to 10.1% in the corresponding fortnight of the previous year. As per the RBI data, this robust expansion was supported by strong growth in non-banking financial companies, commercial real estate, trade, and professional services. Credit to NBFCs expanded 27.7% YoY to ₹20.6 trillion, sharply higher than the 4.5% growth recorded in the corresponding period last year, led by robust growth in loans to non-banking financial companies. Trade credit growth eased marginally to 13.4% from 13.9%, with outstanding loans at ₹13.2 trillion. Credit to agriculture and allied activities also registered 13.7% YoY growth as against 9.2% in the corresponding fortnight of the previous year. The sustained double-digit growth across agriculture, industry, services and personal loans points to improving credit demand in the economy, even as some pockets like construction and textiles saw relatively softer offtake.
The shift toward bank lending has been driven by rising bond yields, with sovereign bond yields climbing 38 basis points to 7.04% since the Iran war began three months ago. According to Bloomberg-compiled data, local bond sales fell 11% to ₹10.9 trillion, while companies are increasingly choosing loans over bonds as a cheaper source of financing. As per Business Standard, corporates, especially lower-rated, are getting a 60-70 basis point advantage by borrowing from banks rather than issuing bonds, with the trend expected to persist until the Middle East conflict is resolved. SBI, the nation's top lender by assets, is seeing robust demand for credit from sectors such as power, renewables, data centers, according to Chairman CS Setty. The shift has been particularly visible among lower-rated borrowers, with companies like Muthoot Microfin Ltd. now getting 75 basis points cheaper borrowing costs by shifting to bank loans, which now comprise about half of their funding mix.
