India’s private investment activity is gaining momentum with an 18% rise in project loan sanctions, yet the overall credit growth remains subdued due to limited broad-based borrowing, highlighting cautious optimism amid infrastructural and regional developments.
India’s private investment cycle is gathering pace, but it has not yet become the sort of broad-based borrowing boom that typically lifts bank credit across the economy. Kotak Institutional Equities said fresh project loan sanctions rose 18% year on year in FY26, yet the improvement has not been strong enough to produce a clear private capex-led credit upswing.
The brokerage pointed to Reserve Bank of India data showing private corporate capital expenditure is expected to rise to Rs 3.2 trillion in FY27, up from Rs 2.6 trillion in the previous fiscal year. Even so, fresh project loan sanctions by banks and financial institutions remained close to 3% of total loans in FY26, unchanged from FY25, while pending disbursements were about 2%. Kotak said that means the pipeline is improving, but not enough to materially alter the overall credit trajectory.
Infrastructure continues to dominate the funding mix. Kotak said it accounted for about half of all project sanctions in FY26, broadly in line with patterns seen over the past several years. Power remained the biggest draw within infrastructure, while lending to roads and bridges fell sharply during the year. By contrast, sanctions for chemical and fertiliser projects, as well as construction, have picked up in recent years, suggesting that the investment cycle is broadening, albeit gradually.
Geographically, Maharashtra and Gujarat kept their positions as the largest recipients of private-sector project sanctions, while Rajasthan and Tamil Nadu also saw a noticeable improvement. Kotak noted that greenfield projects, or new projects built from scratch rather than expansions of existing assets, still make up a major share of sanctions. Large projects costing more than Rs 50 billion, however, remain well below the levels seen before FY14, underscoring how far the market remains from the peaks of the earlier investment cycle.
The brokerage said risks to credit growth are still tilted to the downside from current levels, even though overall bank credit is expanding at about 18% year on year, helped by a strong recovery in corporate lending. That view fits with a broader cautious tone in the banking sector. In April, CRISIL Ratings projected bank credit growth of about 13% this fiscal year, slightly below last year’s 14%, and said the revival in private capex could take longer to feed through to loan demand.
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