New Delhi: India’s credit growth witnessed a sharp rise in FY26, increasing by 61 per cent, largely driven by strong demand from retail borrowers and MSMEs, according to a report by Yes Bank.
Total credit flows climbed to Rs 25.1 lakh crore during the fiscal year, nearly matching deposit mobilisation of Rs 26.1 lakh crore. The report highlighted that robust demand across retail, MSME and infrastructure sectors played a key role in the surge.
However, deposit growth has slowed since FY24, putting some pressure on liquidity in the banking system. As a result, the credit-deposit ratio rose to 82.4 per cent — its highest level in a decade.
Retail lending continues to dominate overall credit growth. The share of personal loans increased from 29 per cent to 33 per cent in recent years, supported by tax relief measures and benefits related to the Goods and Services Tax, which helped boost household incomes.
Within retail loans, vehicle financing emerged as the biggest driver, overtaking housing loans since the third quarter of FY26. The report also noted a shift towards secured lending as growth in unsecured loans moderated.
Industrial credit has also recovered, led by the Micro, Small and Medium Enterprises segment, which now accounts for nearly one-third of total industrial credit. Government support, including credit guarantee schemes and revised MSME definitions, contributed to the growth.
Micro and small enterprises alone added Rs 2.38 lakh crore in loans during the year, while medium enterprises contributed Rs 63,000 crore, the report said.
Looking ahead, the report cautioned that credit growth could slow in FY27 due to risks such as higher oil prices, weaker exports and rising food inflation. It also noted that the fading impact of GST-related benefits may weigh on loan demand in the coming year.
With inputs from IANS