New Delhi [India], October 28 : India’s private banking sector maintains a strongly constructive outlook on credit growth, underpinned by resilient demand across retail, SME, industrial and services segments, even as banks navigate emerging funding and macroeconomic headwinds.
Private Banks are the most optimistic, with nearly nine in ten expecting growth in the mid-teens or higher, according to a FICCI-IBA Bankers’ Survey report covering the July to December 2026 outlook.
The survey findings showed that nearly three-fourths of respondents expect non-food credit to grow in the mid-teens or higher year-on-year over the next six months, and almost all expect at least double-digit growth. Public Sector Banks follow closely, with nearly three-fourths holding this view, whereas all Foreign Bank respondents projected an expansion at a lower double-digit pace.
The survey noted that the broader banking sector maintains a strongly constructive credit outlook. "India’s banking sector continues to demonstrate resilience, supported by improved asset quality, stronger capital buffers, sustained retail and SME credit momentum, and emerging signs of a broader revival in private-sector capital expansion."
The survey was conducted against the backdrop of real GDP growth accelerating to 7.8 per cent in Q1 FY2026-27, alongside real Gross Value Added (GVA) growth of 8.2 per cent. Investment activity also expanded, with gross fixed capital formation rising by 11.9 per cent and private final consumption expenditure increasing by 7.1 per cent. CPI inflation stood at 4.82 per cent in August 2026, while food inflation reached 5.95 per cent.
Retail and SME lending remain the primary anchors of loan expansion. More than four-fifths of respondents projected robust double-digit pace year-on-year growth in both segments. Industrial credit demand is also set to stay sound, with term loans led by infrastructure, engineering goods, auto and auto components. 
In services, term loan demand is led by non-banking financial companies, tourism, hotels, restaurants, and commercial real estate.
However, operational challenges persist across the sector. Slower deposit growth relative to credit demand is identified by around two-thirds of respondents as the primary hurdle to maintaining credit expansion. 
"Slower deposit growth relative to credit demand is identified as the biggest constraint to sustaining healthy credit expansion, cited by about two-thirds of respondents and by a large majority of Public Sector Banks, underscoring the growing importance of strengthening the liability franchise," the report said.
"Geopolitical risks and supply-chain disruptions are seen as the biggest impediment to a broad-based revival in private-sector capital expenditure, cited by around three-fifths of respondents, followed by global economic uncertainty and, to a lesser extent, a weak demand outlook," it added.
For FY27, deposit mobilisation and liability franchise strengthening are the top priority, followed by artificial intelligence and data-driven banking transformation, and cybersecurity. On the policy front, respondents viewed ECLGS 5.0 as the government initiative likely to deliver the most positive impact on credit growth.