The Iran war has significantly disrupted Asian banks' Middle East expansion plans, with major lenders now reassessing their regional ambitions. HSBC Holdings Plc and Standard Chartered Plc, both major arrangers in Asia's loan markets, have told Middle East clients that some transactions involving Asian balance sheets will need to be put on hold. According to The Economic Times, several global lenders are reviewing their pipelines and existing exposures, with some banks from Japan, Greater China and Singapore also pausing discussions. A major Singaporean bank has shelved its Middle East expansion plans for 2026, with its Hong Kong team instructed to pause client discussions after traveling to Dubai in February.
The government has directed banks to develop low-interest loan schemes for retail borrowers and micro and small enterprises, with an emphasis on exploring credit products for tribal populations lacking collateral. According to reports from The Economic Times, banks are expected to share their inputs by the end of this month and implement the schemes early next financial year. A government official stated that banks have been asked to look at various loan schemes and further build upon existing models such as Grameen Credit Score and the Stand Up India 2.0 scheme.
Bank-led credit growth reached a 19-month high of 14.6% at January-end, compared with 11.4% a year ago, as reported by The Economic Times. Non-food bank credit increased 14.4% year-on-year in January, accelerating from 11.3% a year earlier while remaining at levels similar to those in December 2025. The growth was broad-based, led by personal loans, especially vehicle loans, with double-digit MSME lending growth. Credit to services, including trade and non-banking financial companies, remained healthy, supported by gradual pickup in corporate borrowings.
According to bank executives cited by The Economic Times, lenders will look at tailored schemes for micro enterprises, which may include longer tenure periods to bring down interest rates and lower requirements of margin funds. Firms operating in sectors such as leather, toys, and street vendors will be targeted through these new loan products. Public sector banks have already implemented the Grameen Credit Score framework for better assessment of self-help group members and people in rural areas to increase lending to this category.
As reported by The Economic Times, models such as customised credit cards with a ₹5 lakh limit for micro enterprises registered on Udyam portal can also be considered. A bank executive noted that they are already in the process of rolling out these projects and can add more features to them, including additional lending support. The retail loans will cover all consumer loans, including housing loans, subject to prudent lending guidelines.
According to CareEdge Ratings data reported by The Economic Times, gold loans surged 128.8% year-on-year in January, reflecting strong collateral-backed demand amid higher gold prices. The report noted that growth was broad-based, led by personal loans, especially vehicle loans, and remained double-digit in MSME lending. The aim of the government initiative is to push credit growth through inclusive credit strategies for the unbanked population.