The credit score development of banks in India is anticipated to stay subdued as corporates more and more flip to non-bank funding sources amid the prevailing low-interest charge surroundings, in line with a report by the State Financial institution of India (SBI).
The report highlights that companies have a tendency to scale back their reliance on financial institution loans in periods of decrease rates of interest, opting as a substitute for various avenues of elevating capital. An evaluation of useful resource flows over the previous eight years exhibits a recurring development—just like FY21 and FY22—the place corporates averted financial institution borrowing and leaned on non-bank assets.
SBI estimates the share of incremental financial institution credit score in complete useful resource stream will decline from 31.3 per cent in FY25 to 22 per cent by the second quarter of FY26. As of June 2025, headline credit score development stands at 9.5 per cent, whereas non-bank useful resource flows are rising sooner at 15.6 per cent.
Credit score to Micro, Small and Medium Enterprises (MSMEs) has been an outlier, posting a stronger development charge of 21.8 per cent. Nonetheless, general financial institution credit score development by Scheduled Business Banks (SCBs) slowed to 9.8 per cent as of July 11, 2025, in comparison with 14 per cent in the identical interval final yr.
Between April and July this yr, financial institution credit score rose by Rs 2.19 lakh crore (1.2 per cent year-to-date), considerably decrease than the Rs 3.79 lakh crore (2.3 per cent YTD) development recorded in the identical interval final yr. Deposits, in the meantime, grew by Rs 7.45 lakh crore (3.3 per cent YTD), barely above final yr’s Rs 7.01 lakh crore (3.4 per cent YTD).
The report additionally famous a shift in deposit patterns, with greater returns on time period deposits attracting extra inflows. Consequently, the share of financial savings deposits declined to 29.1 per cent in March 2025 from 30.8 per cent a yr in the past and 33 per cent two years earlier.
Trying forward, SBI initiatives deposit development of 12-13 per cent and financial institution credit score development of 10-11 per cent in FY26.
