India's Banking Sector Sees Credit Growth of 11-13% Amid Geopolitical Uncertainty

India's Banking Sector Remains Resilient Amid Geopolitical Uncertainties

India's banking sector has demonstrated resilience in the face of heightened geopolitical uncertainties, with a majority of bankers anticipating a non-food credit growth of 11-13 per cent during January-June 2026, according to the FICCI-IBA Bankers' Survey released on Sunday.

The survey indicates that improving balance sheets, steady economic activity, sustained demand across multiple segments of the economy, and robust retail and SME credit momentum are supporting the positive outlook. Additionally, early signs of revival in private capital expenditure are contributing to the optimistic forecast.

In contrast, industrial credit growth is expected to expand at a more measured pace, reflecting a gradual recovery rather than a sharp acceleration. Despite this, the outlook suggests steady investment activity led by infrastructure development, manufacturing-linked sectors, and government-led capital expenditure.

Key Drivers of Credit Growth

Term loan demand is expected to be largely driven by infrastructure, real estate, auto and auto components, pharmaceuticals, and emerging sectors such as data centres and defence-related industries. Most respondents expect the current monetary policy stance to remain broadly stable in the coming months, indicating a view that the existing policy framework remains appropriately calibrated to balance growth and inflation considerations.

Growing Prominence of Sustainable Finance Opportunities

The survey highlights growing prominence of sustainable finance opportunities, with renewable energy financing emerging as a segment with the strongest growth potential. Artificial Intelligence is perceived as the most disruptive development likely to reshape banking operations, while cybersecurity risk is seen as the most pressing challenge confronting banks.

Expectations and Sentiment

The aggregate distribution of responses indicates that 46 per cent of participants expect overall non-food credit growth in the 11-13 per cent range, making it the dominant view. A further 29 per cent anticipate growth above 13 per cent, while 17 per cent expect growth in the 9-11 per cent range. Only 8 per cent of respondents foresee growth below 9 per cent.

| Growth Range | Percentage of Respondents | | --- | --- | | 11-13% | 46% | | Above 13% | 29% | | 9-11% | 17% | | 5-7% | 4% | | 7-9% | 4% |

Foreign banks predominantly expect growth in the 11-13 per cent range, with a smaller proportion indicating 7-9 per cent growth. This reflects moderate optimism, largely shaped by global liquidity conditions, capital allocation priorities, and selective participation in domestic corporate credit markets.

Banker Confidence and Sectoral Outlook

Public sector banks appear particularly confident in the outlook, reflecting improved asset quality, stronger capital positions, and increasing traction in corporate lending. Sectorally, credit demand from services and retail segments is expected to remain a key driver of overall lending growth.

| Sector | Credit Demand Growth | | --- | --- | | Services | Strong expectations of expansion | | Retail | Robust growth, reinforcing its role as a central pillar of banking sector growth | | SME | Expected to remain particularly strong, reflecting improving business activity and continued policy emphasis on supporting MSME growth |

The services sector outlook reflects strong expectations of expansion, supported by activity in real estate, financial services, logistics, and tourism-related industries. Retail lending is also projected to remain robust, while SME credit demand is expected to remain particularly strong, driven by improving business activity and increased formalisation of credit channels.