Banks supplied 81% of fresh credit to Indian companies between November 2025 and August 2026, as higher bond-market costs drove borrowers towards bank loans.
Indian companies are increasingly leaning on bank borrowing as the cost of funding through bonds climbs, with banks supplying 81% of fresh credit between November 2025 and August 2026, according to a Jefferies research note reported by The Hindu BusinessLine. The shift has helped lift bank credit growth to 18% year-on-year in August, well ahead of the 10% rise in non-bank credit, as firms look for a cheaper and more dependable source of funds. Jefferies said banks have taken a larger share of both the outstanding stock of credit and the flow of new lending, reflecting a broader move away from corporate bonds, commercial paper and overseas borrowing.
The change is most visible in corporate lending, where bank credit growth quickened from 11% in November 2025 to 22% in August 2026. According to the Jefferies report, corporate loans made up about 58% of incremental bank lending over the period, compared with a 52% share in the existing stock at the start of the stretch. Demand was strongest among non-banking financial companies, wholesale trade, commercial real estate, power and chemicals, with lending to NBFCs rising 37% year-on-year in August and credit to wholesale trade climbing 26%. Loans to commercial real estate and chemicals increased 23% each, while power-sector credit rose 21%.
The report also suggests the broader credit cycle remained firm through late summer. A separate report carried by Big News Network said bank credit growth had accelerated to 19% year-on-year by August 31, while deposit growth had reached 18%, leaving the system’s credit-to-deposit ratio close to 80% and liquidity still comfortable at about Rs 5 trillion. Jefferies also noted that overall credit growth across banks and other financing channels improved to 16% in August 2026, even as non-bank credit growth slowed from 12% in November 2025 to 10%.
Looking ahead, Jefferies expects the pace of bank lending to ease from late 2026 or early 2027 as the comparison base becomes tougher. The brokerage said credit growth could remain elevated if oil prices and yields stay high, but its baseline view is for bank credit growth to slow to 16% by March 2027 and to 13% in fiscal 2028-29. It added that easier access to the bond market and external borrowing could reduce companies’ reliance on banks if financing conditions improve, though it still favours banks over non-banking financial companies.
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