3 days ago

India moving towards affordable credit: RBI

Personal loans moderate while corporates seek funds for capital investment

India’s banking sector underwent a significant structural shift, moving towards a more affordable borrowing, largely driven by strategic monetary policy actions. 

According to the Reserve Bank of India (RBI) Annual Report for the year 2025-26, a substantial 64.2% of all bank loans – up from 43.9% the previous year – carried an interest rate of less than 9% by March 2026 –  injecting highly favourable financing conditions into the broader economy. 

This cheaper capital fuelled a broad-based, double-digit credit expansion that reached every population demographic across rural, urban, and metropolitan branches. 

Private sector banks accelerated their credit growth to 12.3%, while public sector banks and small finance banks outpaced headline trends, signalling high institutional confidence and a deeply competitive lending environment.

A remarkable transformation also occurred in the composition of credit, characterised by a sharp pivot toward productive industrial sectors over consumer debt.

Personal loans moderate: After years of aggressively outpacing the market, personal loan growth moderated to 12.9%, slipping below overall credit growth for the first time in several years. 

Instead, commercial lending took center stage: credit to the private corporate sector surged by 15.5% (accounting for over a quarter of all bank credit), while agricultural and industrial lending jumped to 14.4% and 12.0%, respectively. 

Capital moving to productive investments: This strategic shift indicates that bank capital is actively moving away from unsecured retail consumption and toward capital-intensive, supply-side investments that build long-term economic capacity.

Despite this corporate revival, individual and household borrowing maintained a massive structural footprint in India’s financial ecosystem. The household sector alone commanded 58.6% of total bank credit and swallowed up roughly three-fifths of all new, incremental loans generated during the year. 

Women’s share in credit grows: Individuals comprised 47.8% of the entire loan landscape, with female borrowers continuing a steady upward climb to capture a 24.7% share of that segment. 

Underpinning this entire borrowing boom was a strong preference for stability; term loans made up 62.8% of total bank credit, with an overwhelming 80.2% of those long-term commitments locked into highly manageable interest rates under 10%.