Non-food bank credit demonstrated strong momentum in Q1 FY27, with 18.6% year-on-year growth as of June 2026, crossing ₹219.3 lakh crore total outstanding credit. This represents a significant acceleration from 9.3% growth recorded during the corresponding fortnight of June 2025, indicating robust credit demand across sectors. Gold loans drove a sharp acceleration, expanding 93.8% year-on-year to ₹5.4 lakh crore, accounting for 13.1% of the ₹5 lakh crore incremental non-food credit during the quarter. The expansion was supported by incremental bank credit rising by ₹7.2 lakh crore or 3.4% quarter-on-quarter during Q1 FY27. According to the latest SBI Research report, industry and personal loans together accounted for 63% of incremental credit growth during the April-June quarter, with corporate and retail loans fueling almost two-thirds of bank credit expansion.
Bank credit to industries showed remarkable acceleration with 19.2% year-on-year expansion, representing the highest first-quarter growth in recent years, taking outstanding loans to ₹47.7 lakh crore. Medium enterprises recorded the fastest growth at 30.2%, with outstanding credit rising by ₹1.2 lakh crore to ₹5.1 lakh crore. Large industries increased 16.6% to ₹32.2 lakh crore, while micro and small enterprises grew 23% compared to just 2% growth previously. Petroleum, coal products and nuclear fuels led sub-industry growth at 48.6%, with each of these sectors seeing loan book expansions of around ₹25,000 crore, together contributing 41% of incremental bank credit in the quarter. Infrastructure credit grew 10.9% YoY to ₹15.12 trillion, with power sector lending rising 23.2%. According to SBI Research, petroleum products, coal and nuclear fuel emerged as the biggest beneficiaries with ₹255 billion in incremental credit, followed by engineering at ₹249 billion, infrastructure at ₹217 billion, and chemicals at ₹208 billion.
The services sector emerged as the standout performer with 21.4% year-on-year growth, contributing ₹3.2 lakh crore or 43.8% of total incremental credit during Q1 FY27. Credit to non-banking financial companies expanded 22.8% year-on-year, with outstanding loans increasing by ₹3.8 lakh crore to ₹20.6 lakh crore. Commercial real estate and trade followed with growth rates of 21.4% and 18.7% respectively. This acceleration was driven by robust growth across all segments, highlighting the sector's continued importance in India's economic expansion. According to Haitong Securities India report, credit to NBFCs rose about 32% YoY and accounted for nearly 10% of total bank credit, while lending towards commercial real estate also accelerated to around 22% YoY. The report noted that growth in credit towards services was up by 21.4% YoY led by growth in banks' lending to NBFCs (+32% YoY) comprising ~10% of total bank credit, uptick in lending towards CRE to ~22% YoY.
Retail lending continued to post healthy growth with 15.8% year-on-year expansion, supported by steady housing loan demand along with higher vehicle, jewellery and education loans. Loans against gold jewellery, which include certain agriculture loans, remained the fastest-growing sector, surging 93% YoY, an increase of ₹1.72 lakh crore from June 2025 levels. Vehicle loans with 17% growth were the second-fastest in the personal loan segment, nearly double the 9.2% growth recorded a year earlier. However, credit card outstanding growth decelerated to 2% compared to 7% recorded a year ago, reflecting changing consumer lending patterns. Education loans maintained strong growth at 13% YoY, with growth rates slightly down from 14% recorded a year ago. The RBI data confirmed that credit to personal loans segment also maintained strong momentum, recording a 15.8% year-on-year growth as against 11.7% a year ago.
India's microfinance sector experienced a 4% contraction to ₹3.26 lakh crore by June end from ₹3.39 lakh crore three months earlier, marking a reversal after a previous rebound in March. According to Equifax India data, private bank group portfolio declined to ₹79,023 crore from ₹89,548 crore, while pure-play microfinance companies saw their cumulative portfolio drop to ₹1,40,203 crore from ₹1,41,704 crore. Bandhan Bank, the country's largest microfinance lender, reported its individual and joint liability micro loans contracting to ₹52,640 crore from ₹52,810 crore a year ago. Industry executives attributed the contraction to uneven monsoon progress weighing on rural demand and lender caution growing due to uncertain monsoon patterns and geopolitical uncertainties. Fuel price increases led to higher operating costs for lenders using field force for business generation and repayment collection, with Bandhan Bank's managing director noting they remain cautious about growing high-yielding EEB book due to expected pressures for the next few quarters.
