India's top private banks defy West Asia shadow with strong Q1 credit growth. Here's why

India’s top four private sector lenders kicked off the financial year with robust credit growth in the April-June quarter, powered by a resurgence in corporate loan demand. Despite an uncertain global macroeconomic environment weighed down by the conflict in West Asia, the banks maintained stable asset quality and reported minimal fallout from international supply chain disruptions. 

HDFC Bank, the nation’s largest private lender, posted a 15.4% increase in gross advances to ₹30.61 lakh crore. While retail loans grew 7.2%, small and mid-market enterprise loans surged nearly 19%, closely followed by an 18.6% rise in corporate and wholesale loans. 

ICICI Bank mirrored this strong momentum, expanding its total loan portfolio by 20% year-on-year to ₹16.31 lakh crore. The bank registered a 12% expansion in retail loans, while its business banking portfolio jumped 28% and the domestic corporate book grew 18.5%. 

Rivals Axis Bank and Kotak Mahindra Bank also posted strong advances. Axis Bank's loans climbed 19% to over ₹12.61 lakh crore, while Kotak Mahindra Bank recorded a 15% year-on-year growth to ₹5.12 lakh crore. 

Corporate demand defies geopolitical headwinds 

Loan growth across segments was characterized by corporate credit expanding at a faster clip than retail. This surge comes despite global uncertainties stemming from the war between the US and Iran in West Asia, which has disrupted supply chains and stoked inflation. 

Bank executives noted that while they are monitoring their portfolios closely, the domestic impact has been contained. The union government’s Emergency Credit Line Guarantee Scheme (ECLGS) further cushioned the market, driving credit absorption in the SME and mid-market segments. Demand was particularly visible in the electronics, auto, renewable energy, and commodity sectors. 

“There had been a few sectors that had been initially impacted because of the gas supply and who were dependent on the imported gas. But, with the things having normalised and gas supplies having been restored, we have seen a minimal impact. It was there for a period of about six weeks, but things have normalised to a large extent,” explained Kaizad Bharucha, the deputy MD of HDFC Bank. 

Bharucha added that logistics delays in shipping have begun to ease. “While, there is a bit of a challenge, its far lower than when it initially came about,” he said, noting that higher supply-side costs have not compressed demand. 

According to Bharucha, corporate growth was driven by a mix of term loans and working capital, amplified by elevated commodity prices and volatile bond markets. “Markets have been volatile, so some amount of demand had shifted from the bond market to the corporate loan market. So that led to little more of term (loans) coming in. There’s also been a good amount of working capital requirement, given that commodity prices had been elevated,” he said, adding that HDFC Bank remains a leading disburser under the ECLGS. 

ICICI Bank similarly capitalised on shifting market dynamics as businesses required higher working capital. 

“We are seeing loan growth across all the segments. We continue to have active engagements with our corporate clients and we continue to seek opportunities which fit within our risk and reward thresholds,” said Sandeep Batra, the executive director of ICICI Bank. “Also, we have seen some kind of a moderation in the bond market and equity market, which has been an opportunity for us to capitalise,” Batra stated. 

Asset quality & outlook 

Even as loan books expanded, overall asset quality remained resilient. Lenders reported year-on-year declines in non-performing assets (NPAs), though some experienced minor sequential upticks. 

For HDFC Bank, gross NPAs stood at 1.17% in the April-June quarter, compared with 1.15% in the previous January-March quarter and 1.40% in the year-ago June quarter. The bank’s net NPAs were 0.41% in the first quarter, slightly higher than the 0.38% reported in the fourth quarter, but lower than the 0.47% from a year earlier. 

ICICI Bank reported gross NPAs of 1.38% for the June quarter, down from 1.40% in the previous quarter and 1.67% in the same period last year. Its net NPAs stood at 0.35% in the first quarter, compared to 0.33% in the fourth quarter and 0.41% in the year-ago period. Other private lenders maintained similar asset quality trends. 

Looking ahead, executives highlighted the monsoon trajectory as a key variable. While rainfall has covered the country, it remains below average in several regions. With El Niño conditions introducing uncertainty, a weaker monsoon could pressure rural markets in the coming months.