Indian banks are experiencing a significant uptick in corporate credit, with many reporting robust double-digit growth in the second quarter of the current financial year (July-September 2026). This expansion comes despite prevailing geopolitical uncertainties, signaling a potential pickup in corporate capital expenditure across various sectors.
Private Sector Banks Lead the Charge
Private sector lenders have shown particularly strong performance. ICICI Bank, for instance, recorded a 30% year-on-year increase in credit growth, pushing its total to over Rs 18.31 lakh crore. Its domestic corporate portfolio grew by nearly 31%, and business banking by 34%, outpacing the 15% growth seen in retail and rural loans.
Sandeep Batra, executive director at ICICI Bank, highlighted that this corporate loan growth is largely broad-based, encompassing segments related to both capital expenditure and higher working capital cycles. He also noted a discernible shift in demand from the bond market and external commercial borrowings towards traditional bank borrowing, as corporates build buffers for resilience.
Rival Axis Bank also reported a 23% rise in net advances, reaching Rs 13.74 lakh crore, with corporate loans surging an impressive 34%. This compares favorably to its 25% growth in the SME segment and 16% in retail loans. Kotak Mahindra Bank mirrored this trend, with a 25% growth in net advances to Rs 5.77 lakh crore.
Paritosh Kashyap, whole-time director at Kotak Mahindra Bank, remarked, "For the last couple of quarters, we are seeing strong loan growth, and that is seen across industries. Base metals, services including real estate, infrastructure, and multiple other sectors are really seeing loan growth, and we see this sustaining for the time being."
Public Sector Banks Also Demonstrate Strength
Public sector banks are not far behind. Canara Bank's MD & CEO, Brajesh Kumar Singh, reported a 19.46% growth, exceeding their 11-12% guidance, and boasts a strong corporate pipeline of Rs 47,000 crore. Punjab National Bank (PNB) saw a 15% growth in advances in the September quarter, reaching Rs 13.41 lakh crore.
Ashok Chandra, MD & CEO of PNB, expressed confidence that credit growth is well-positioned to maintain its momentum, supported by a robust sanction pipeline. He stated that the bank sanctioned Rs 4 lakh crore in corporate credit lines in FY2025-26, and over Rs 2.5 lakh crore in the first half of the current fiscal year, with a pipeline of Rs 1.58 lakh crore providing strong future visibility. Key sectors receiving proposals include infrastructure, power, renewable energy, data centers, petroleum and natural gas, chemicals, real estate, and food processing.
Outlook and Potential Headwinds
Credit ratings agency CRISIL anticipates a normalization of banking sector credit growth in the second half of the current financial year. While projecting a healthy domestic credit growth of 14.5-15.5% for the year ending March 2027, this is a moderation from the approximately 19% seen until August 2026. Krishnan Sitaraman, Chief Ratings Officer at Crisil, cited a high base effect from the previous fiscal year and the gradual waning of policy measure impacts as contributing factors.
CRISIL expects corporate credit to grow 10-11% this financial year, slightly up from last year's 9.8%. This growth will be fueled by higher working capital demand and continued reverse substitution from bond markets to bank loans, as bond yields are expected to remain elevated and reprice upwards faster than bank lending rates.
However, rising interest rates pose a potential challenge. The Reserve Bank of India (RBI) raised the repo rate by 25 basis points in its October monetary policy committee meeting, and economists foresee further hikes of 50-75 basis points. As banks pass on these higher rates, it could temper credit growth in the coming quarters.