Indian banking sector: 11–13% credit growth in H1 2026

Survey signals steady credit momentum into mid-2026

India’s banking sector is expected to maintain a constructive credit growth outlook through the first half of 2026, even amid heightened geopolitical uncertainty. The latest FICCI-IBA Bankers’ Survey points to non-food credit growth of 11–13% for January to June 2026 as the dominant expectation. The forecast is anchored in improving balance sheets, steady economic activity, and sustained demand across multiple segments.

The survey captures lender sentiment rather than reporting realised system-wide credit data. Still, the breadth of responses suggests that banks, across ownership types, are preparing for continued loan demand while simultaneously stepping up focus on technology-driven changes and risk management.

What the FICCI-IBA Bankers’ Survey covered

This was the 21st round of the FICCI-IBA Bankers’ Survey, conducted during January-February 2026. A total of 24 lenders participated, spanning public sector banks, private sector banks, foreign banks, small finance banks, and cooperative banks. The outlook period covered is January to June 2026.

The survey results were unveiled on Sunday, with multiple summaries highlighting that banks remain “reasonably optimistic” on credit growth. The same set of findings also flags structural shifts that banks expect to shape operations in 2026, particularly the adoption of artificial intelligence and the rise in cybersecurity threats.

Overall credit growth expectations: 11–13% leads the distribution

Across participating lenders, the most common view was that non-food credit growth will be in the 11–13% band for H1 2026. The response distribution also shows a meaningful portion expecting even stronger growth, while only a small share expects a sharp slowdown.

The survey notes that foreign banks predominantly expect growth in the 11–13% range, with a smaller proportion indicating 7–9% growth. This is described as moderate optimism shaped by global liquidity conditions, capital allocation priorities, and selective participation in domestic corporate credit markets.

Retail lending remains the key engine

Retail lending is expected to remain the primary growth driver, with 52% of banks projecting loan growth above 13% in the segment. Notably, none of the surveyed lenders expect retail loan growth to fall below 9%, indicating broad confidence in household demand for credit.

The survey links the retail outlook to resilient economic activity and improving asset quality. It also underscores that retail lending continues to act as a central pillar of overall banking sector growth as banks scale distribution and deepen participation across customer segments.

SME credit stays strong on business activity and policy support

SME lending is also projected to sustain strong double-digit expansion. Respondents attribute this to improving business activity among smaller enterprises, greater formalisation, and ongoing policy support for MSMEs.

The survey’s broader narrative suggests that improved balance sheets and better asset quality are enabling banks to pursue growth opportunities in SMEs with more confidence. This segment remains a focus area for lenders seeking diversified loan books alongside retail expansion.

Services sector demand led by real estate, NBFCs, logistics, tourism

Credit demand from services is expected to remain a key contributor to overall lending growth in H1 2026. Banks surveyed expect double-digit growth led by commercial real estate, NBFCs, tourism, and logistics. Another survey summary also groups this momentum with activity in real estate, financial services, and tourism-related industries.

This services-led demand matters because it signals broad-based borrowing beyond household loans. It also indicates continued activity in sectors tied to consumption and supply chains, supporting the survey’s view of steady economic conditions through mid-2026.

Industrial credit growth: measured recovery, not a sudden capex boom

In contrast to retail and services, industrial credit growth is expected to expand at a more measured pace. Nearly 71% of respondents expect industrial credit growth in the 9–13% range, which the survey interprets as a gradual recovery in capital expenditure rather than a sharp acceleration.

Term loan demand is expected to be driven largely by infrastructure, real estate, auto and auto components, pharmaceuticals, and emerging sectors such as data centres and defence-related industries. Another survey summary adds that working capital requirements are expected to be led by textiles, automobiles, and pharmaceuticals.

Monetary policy expectations and bank positioning

Most respondents expect the current monetary policy stance to remain broadly stable in the coming months. The survey frames this as a view that the existing policy framework is appropriately calibrated to balance growth and inflation considerations.

Within the banking system, public sector banks appear particularly confident, reflecting improved asset quality, stronger capital positions, and increasing traction in corporate lending. Private lenders are described as adopting a more selective approach, while the broader survey still indicates sustained momentum in non-food credit.

Agriculture credit is expected to grow in the 9–13% range, pointing to stable rural demand conditions in the survey’s outlook.

AI and cybersecurity: operational disruption meets risk escalation

The survey highlights a structural shift underway in banking operations. Artificial intelligence is perceived as the most disruptive development likely to reshape banking, with 48% of respondents identifying AI-driven credit underwriting and collections as the biggest disruptive force in 2026. The survey notes that AI is expected to fundamentally reshape risk assessment, customer onboarding, and recovery mechanisms.

But the technology push comes with sharper downside risks. Cybersecurity is cited as the most pressing challenge by 71% of banks. The article context also notes that India faced a major cyber attack in early 2026 that disrupted digital services and exposed vulnerabilities in a rapidly growing digital financial system, alongside rising threats such as AI-driven cybercrime, phishing, ransomware, and supply-chain vulnerabilities.

Regulatory bodies, including the Reserve Bank of India, are strengthening cybersecurity rules. The measures referenced include tighter third-party risk management and multi-factor authentication, reflecting the sector’s need to build resilience as digital dependence rises.

Sustainable finance emerges as a strategic opportunity

Beyond core lending, the survey flags growing prominence of sustainable finance opportunities. Renewable energy financing is identified as the segment with the strongest growth potential, with 83% of respondents backing it.

This theme sits alongside banks’ stated priorities such as climate risk management and financial inclusion, as highlighted in one survey summary. Taken together, the responses suggest lenders are balancing near-term credit growth goals with longer-term shifts in regulation, competition, and risk expectations.

Why the survey matters for investors and the sector

The central takeaway is that banks expect credit demand to remain robust in H1 2026, led by retail, SMEs, and services, while industrial credit improves more gradually. The distribution of responses, especially the dominance of the 11–13% range and the small share expecting below 9%, points to confidence in loan growth despite global uncertainty.

At the same time, the survey’s risk signals are clear. Cybersecurity is now the top concern for a large majority of banks, while AI adoption is seen as the most disruptive force reshaping lending and collections. Execution will likely be judged not only by growth, but also by how effectively banks manage cyber resilience, third-party dependencies, and evolving compliance expectations.

Conclusion

The FICCI-IBA survey projects non-food credit growth of 11–13% for January to June 2026, with retail and SME lending expected to lead and services credit remaining supportive. Industrial credit growth is forecast to be steadier, consistent with a gradual capex recovery. The next set of sector signals will likely come from how banks implement AI-led operational changes while responding to heightened cybersecurity threats and evolving regulatory expectations through 2026.