Why banks are seeing strong growth in corporate credit despite geopolitical uncertainties
Lenders say demand for corporate credit has been broad-based across sectors, with some shift from bond markets to bank borrowing also aiding growth
- Oct 26, 2026,
- Updated Oct 26, 2026 7:20 PM IST
Most banks have reported strong double-digit credit growth in the July-September quarter. Importantly, corporate borrowings also continue to grow at a good pace, and the pipeline remains strong, signs that despite the overall geopolitical uncertainties, corporate capital expenditure may be beginning to pick up.
In the second quarter, private sector lender ICICI Bank reported a 30% year-on-year rise in credit growth to over Rs 18.31 lakh crore. While growth has been broad-based, corporate loans have seen rapid growth. The domestic corporate portfolio grew almost 31% during the quarter at ICICI Bank, and business banking grew 34%, compared with a 15% growth in the retail and rural loan portfolio.
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“The (corporate loan) growth has been largely broad-based, and it includes segments across capex and a higher working capital cycle,” said Sandeep Batra, executive director at ICICI Bank.
He also pointed out that there had been some demand shift from the bond market and external commercial borrowings towards bank borrowing. The corporates have also been building buffers to ensure resiliency, he added.
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Rival Axis Bank reported a 23% rise in net advances to Rs 13.74 lakh crore, with corporate loans surging 34%. This compares to 25% loan growth in the SME segment and 16% in retail loans. Kotak Mahindra Bank too has seen a 25% growth in net advances at Rs 5.77 lakh crore.
“For the last couple of quarters, we are seeing strong loan growth, and that is seen across industries. Base metals, services including real estate, infrastructure, and multiple other sectors are really seeing loan growth, and we see this sustaining for the time being,” said Paritosh Kashyap, whole-time director at Kotak Mahindra Bank.
It’s a similar story at public sector banks too. Brajesh Kumar Singh, the MD and CEO of Canara Bank, pointed out that against their guidance of 11-12%, the bank had grown 19.46% and had a strong corporate pipeline of Rs 47,000 crore. Rival Punjab National Bank saw a 15% growth in advances in the September quarter to Rs 13.41 lakh crore.
Ashok Chandra, the MD and CEO of Punjab National Bank, said that credit growth is well positioned to maintain its strong momentum, supported by a robust sanction pipeline.
“The bank sanctioned Rs 4 lakh crore in FY2025-26 in corporate credit lines. Further, in the first half of this year, we have already crossed more than Rs 2.5 lakh crore of sanctions in corporate credit. Our pipeline credit is to the tune of Rs 1.58 lakh crore, which provides a strong visibility for future credit growth,” Chandra said.
Infrastructure, power, renewable energy, data centres, petroleum and natural gas, chemicals, real estate and food processing were among the sectors he identified where they were getting good proposals.
Credit ratings agency CRISIL expects the banking sector credit growth in the second half of the current financial year will normalise from around 19% seen till August. It has projected a domestic credit growth of 14.5-15.5% for the year-ending March 2027.
“While credit growth for this fiscal is seen as healthy, it is likely to normalise from the 19% level seen as of August 2026. This is because of two main reasons - a high base effect, with credit growth in the second half of last fiscal accelerating sharply to 20% (annualised) following a muted growth of 8% in the first half; and gradual waning of the impact of the slew of policy measures that drove credit growth, including the rationalisation of the goods and services tax, lower interest rates and income tax concessions,” said Krishnan Sitaraman, Chief Ratings Officer, Crisil.
According to Crisil, corporate credit is expected to grow 10-11% this financial year, marginally higher than the 9.8% growth recorded last year, driven by higher working capital demand and continued reverse substitution from the bond market to bank loans, as bond yields would remain elevated as they reprice upwards faster than bank lending rates amid rising interest rates.
The Reserve Bank of India raised the repo rate by 25 basis points in its latest monetary policy committee meeting in October and economists expect it to raise the benchmark policy rate by at least another 50-75 basis points over the next few MPC meetings, amid rising inflation. As banks pass on higher interest rates over time, that could also weigh on credit growth in the coming quarters.
Most banks have reported strong double-digit credit growth in the July-September quarter. Importantly, corporate borrowings also continue to grow at a good pace, and the pipeline remains strong, signs that despite the overall geopolitical uncertainties, corporate capital expenditure may be beginning to pick up.
In the second quarter, private sector lender ICICI Bank reported a 30% year-on-year rise in credit growth to over Rs 18.31 lakh crore. While growth has been broad-based, corporate loans have seen rapid growth. The domestic corporate portfolio grew almost 31% during the quarter at ICICI Bank, and business banking grew 34%, compared with a 15% growth in the retail and rural loan portfolio.
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“The (corporate loan) growth has been largely broad-based, and it includes segments across capex and a higher working capital cycle,” said Sandeep Batra, executive director at ICICI Bank.
He also pointed out that there had been some demand shift from the bond market and external commercial borrowings towards bank borrowing. The corporates have also been building buffers to ensure resiliency, he added.
Must Watch: PNB Reports Strong Q2FY27 Results; MD & CEO Ashok Chandra On Earnings And Growth Outlook
Rival Axis Bank reported a 23% rise in net advances to Rs 13.74 lakh crore, with corporate loans surging 34%. This compares to 25% loan growth in the SME segment and 16% in retail loans. Kotak Mahindra Bank too has seen a 25% growth in net advances at Rs 5.77 lakh crore.
“For the last couple of quarters, we are seeing strong loan growth, and that is seen across industries. Base metals, services including real estate, infrastructure, and multiple other sectors are really seeing loan growth, and we see this sustaining for the time being,” said Paritosh Kashyap, whole-time director at Kotak Mahindra Bank.
It’s a similar story at public sector banks too. Brajesh Kumar Singh, the MD and CEO of Canara Bank, pointed out that against their guidance of 11-12%, the bank had grown 19.46% and had a strong corporate pipeline of Rs 47,000 crore. Rival Punjab National Bank saw a 15% growth in advances in the September quarter to Rs 13.41 lakh crore.
Ashok Chandra, the MD and CEO of Punjab National Bank, said that credit growth is well positioned to maintain its strong momentum, supported by a robust sanction pipeline.
“The bank sanctioned Rs 4 lakh crore in FY2025-26 in corporate credit lines. Further, in the first half of this year, we have already crossed more than Rs 2.5 lakh crore of sanctions in corporate credit. Our pipeline credit is to the tune of Rs 1.58 lakh crore, which provides a strong visibility for future credit growth,” Chandra said.
Infrastructure, power, renewable energy, data centres, petroleum and natural gas, chemicals, real estate and food processing were among the sectors he identified where they were getting good proposals.
Credit ratings agency CRISIL expects the banking sector credit growth in the second half of the current financial year will normalise from around 19% seen till August. It has projected a domestic credit growth of 14.5-15.5% for the year-ending March 2027.
“While credit growth for this fiscal is seen as healthy, it is likely to normalise from the 19% level seen as of August 2026. This is because of two main reasons - a high base effect, with credit growth in the second half of last fiscal accelerating sharply to 20% (annualised) following a muted growth of 8% in the first half; and gradual waning of the impact of the slew of policy measures that drove credit growth, including the rationalisation of the goods and services tax, lower interest rates and income tax concessions,” said Krishnan Sitaraman, Chief Ratings Officer, Crisil.
According to Crisil, corporate credit is expected to grow 10-11% this financial year, marginally higher than the 9.8% growth recorded last year, driven by higher working capital demand and continued reverse substitution from the bond market to bank loans, as bond yields would remain elevated as they reprice upwards faster than bank lending rates amid rising interest rates.
The Reserve Bank of India raised the repo rate by 25 basis points in its latest monetary policy committee meeting in October and economists expect it to raise the benchmark policy rate by at least another 50-75 basis points over the next few MPC meetings, amid rising inflation. As banks pass on higher interest rates over time, that could also weigh on credit growth in the coming quarters.