India’s bank credit growth closed the Financial year 2026 on a strong note, led by robust lending to NBFCs, MSMEs and retail borrowers, even as gold loans surged amid elevated prices, according to a report by CareEdge Ratings.
The report said that the non-food bank credit growth accelerated to 15.9% year-on-year in March 2026, compared with 11% in March 2025, driven by strong traction in personal loans, services and industrial credit.
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Part of the rise reflects changes in the fortnightly reporting framework introduced under the Banking Laws (Amendment) Act, 2025.
It said the credit to the services sector grew 19% in March, led by lending to non-banking financial companies (NBFCs), trade and commercial real estate. Bank lending to NBFCs rose sharply by 26.3% year-on-year, with outstanding credit crossing Rs 20 lakh crore for the first time to reach Rs 20.65 lakh crore.
CareEdge said banks increasingly preferred lending to mid-sized NBFCs as they shifted away from higher-cost market borrowings.
Industrial credit growth nearly doubled to 15% in March 2026 from 8.2% a year ago, supported by stronger lending to infrastructure, engineering, metals, chemicals and petroleum sectors. MSME lending continued to outpace large industries, with the share of micro and small enterprises in industrial credit rising to 23.2% from 20.1% a year earlier.
Infrastructure lending also improved, rising 9.5% year-on-year, aided by strong growth in the power and ports sectors.
Retail lending remained a key growth driver, with personal loans expanding 16.2% year-on-year. Vehicle loans accelerated to 18.6% growth, supported by improved affordability after GST cuts and strong consumer demand. Mortgage loan growth remained stable at 11.5%.
Gold loans continued to witness exceptional growth, surging 123.1% year-on-year in March 2026 due to elevated gold prices and reclassification of some agri-gold loans into the retail segment.
Meanwhile, credit card loan growth slowed sharply to 3.5% from 10.6% a year earlier, indicating cautious lending in unsecured retail credit.
The report also flagged risks from geopolitical tensions in West Asia, warning that export-oriented MSMEs in sectors such as gems and jewellery, textiles and ceramics could face pressure from rising input costs and weaker demand.
To address liquidity stress, the government recently approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, aimed at supporting MSMEs and other sectors affected by the crisis.
CareEdge expects overall bank credit growth to remain steady in the 13-14.5% range in FY27, though elevated crude prices, supply chain disruptions and prolonged geopolitical tensions could tighten lending conditions and raise borrowing costs.