Bank credit growth hits 16% in FY26; gold loans up 123%

Credit growth accelerates at the year-end

India’s domestic banking system closed FY26 with a clear acceleration in credit growth, led by retail demand and stronger lending to select wholesale segments. An ICICI Bank report said non-food credit (NFC) rose 15.9% year-on-year, taking outstanding NFC to around ₹213 trillion as of March 31, 2026. Separately, Reserve Bank of India (RBI) data showed overall banking credit expanding 16.08% year-on-year in FY26 to ₹213.61 trillion. The year-end numbers were also described as the fastest pace since FY24, when system credit grew by more than 20%.

Even as credit improved, deposit growth remained lower. RBI data showed deposits growing 13.47% year-on-year in FY26 to ₹262.30 trillion. This widening gap between credit and deposits is an important operating variable for banks because it affects liquidity, funding costs, and the need to raise short-term money.

What “non-food credit” means in this context

Non-food credit refers to bank lending to the broader economy excluding credit extended to government food procurement agencies. It is commonly used as a cleaner indicator of economic credit demand because it filters out seasonal or policy-driven food procurement lending. The ICICI Bank report framed NFC as the everyday credit that supports households and businesses.

The report also outlined the broad buckets of NFC: personal loans, business or industrial loans, agriculture loans, and services loans. FY26’s growth was described as broad-based across key segments, with momentum improving to above 16% year-on-year by the end of March.

Retail lending stays central, with secured products in focus

Retail lending remained a key driver of system growth in FY26. ICICI Bank’s report said retail lending growth improved to 16.2% year-on-year. Within retail, gold loans stood out sharply, rising 123% year-on-year, indicating a significant shift in the mix of incremental retail credit.

Other retail categories were steadier. Home loans grew 11.5% year-on-year, while retail growth excluding gold loans was lower at around 12%. Other personal loans rose 13% year-on-year, suggesting improvement even beyond core secured products. But credit card growth remained muted at 3.5% year-on-year, pointing to moderation in some unsecured segments.

NBFC and commercial real estate credit show strong momentum

Beyond households, ICICI Bank’s report pointed to a strong pickup in credit to non-banking financial companies (NBFCs), which grew 26% year-on-year. Credit to commercial real estate (CRE) rose 18% year-on-year. Industry credit improved too, with growth of 15% year-on-year.

The report also said a meaningful part of the acceleration is being driven by large industry, which reached a multi-month high of 9% year-on-year, along with NBFCs. However, it flagged that this mix may be net interest margin (NIM) dilutive for banks, since pricing and risk weights can vary across segments.

RBI data: credit growth outpaces deposits

RBI’s system-level numbers reinforce the broader theme: credit grew faster than deposits in FY26. Total banking credit stood at ₹213.61 trillion, while deposits were ₹262.30 trillion at the end of the year. Experts cautioned that year-end growth may be inflated due to changes in RBI reporting dates, suggesting the headline pace should be read with that caveat.

Still, credit momentum was described as improving in recent months, particularly in corporate and micro, small and medium enterprise (MSME) segments, with retail also strong due to gold loans. This combination of corporate, MSME and secured retail demand has been a recurring feature across multiple commentaries cited in the text.

Recent fortnight data shows a sharp pickup

In the fortnight ended March 31, system credit rose 2.8% or ₹5.92 trillion, compared with just 0.1% or ₹0.18672 trillion in the previous fortnight. Deposits grew 4.87% or ₹12.18 trillion in the same fortnight. The size of the move at the year-end supports the point that timing and reporting effects can influence how FY-close numbers look.

The broader takeaway, however, is that credit growth remained strong into the final stretch of the year, even as banks managed tighter system liquidity.

Certificates of Deposit used to bridge mismatches

With credit growth running ahead of deposit mobilisation, banks increased their reliance on Certificates of Deposit (CDs) to manage funding needs. Banks and financial institutions raised over ₹5.27 trillion via CDs in Q4 FY26, an increase of more than 30% sequentially and year-on-year. Total CD issuances in FY26 neared ₹14 trillion, with March alone at ₹2.14 trillion.

The issuance levels were linked to system liquidity staying tight despite RBI measures to inject funds. The text also connects the higher CD usage to balance sheet mismatches created when loan growth outpaces deposit growth.

Why corporates returned to bank borrowing

The shift in corporate funding preferences was also flagged as a factor behind stronger bank credit. Icra’s vice-president for financial sector ratings, Sachin Sachdeva, said declining lending rates made bank borrowing more attractive relative to bond markets, where yields remained elevated. As a result, bond market activity was described as muted while bank funding gained share.

Major banks such as SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank were noted as having reported robust growth in corporate and MSME portfolios up to Q3 FY26, consistent with the system-level pickup.

Key data snapshot

Outlook: projections point to moderation in FY27

Rating agencies were cited as expecting credit growth to moderate to about 13%-14.5% in FY27, with deposit growth lagging at 11%-12%. The same projections imply banks may need more aggressive deposit mobilisation, particularly if system liquidity remains tight and loan demand stays resilient.

The FY26 data shows momentum concentrated in secured retail (notably gold loans) and improving corporate and MSME demand, alongside faster growth in NBFC credit. The next phase will likely hinge on how quickly deposits grow relative to loans, and how banks manage funding costs while maintaining margins in a shifting loan mix.