India’s banking sector witnessed a 10.3% year-on-year increase in total lending as of September 2025, according to Trading Economics. This robust growth reflects both rising corporate and retail credit demand and the strengthening of India’s economic activity post-pandemic.
The trend signals growing business confidence, consumer spending, and investment appetite, which are critical for sustained economic growth.
1. Sector-Wise Lending Growth
Corporate Lending: Strong uptick due to infrastructure projects, industrial expansion, and working capital requirements. Large corporations and mid-sized companies are leveraging credit for capital expenditure and expansion.
Retail Lending: Personal loans, home loans, car loans, and credit cards have contributed significantly to YoY growth, reflecting higher consumer confidence and urban spending.
SME Lending: Support schemes and digital lending platforms have encouraged small and medium enterprises to access credit, adding to overall growth.
2. Key Drivers of 10.3% Lending Growth
Favorable Economic Conditions: Stable GDP growth and robust manufacturing output drive demand for credit.
Rising Disposable Income: Consumers are borrowing for homes, vehicles, and personal expenses.
Lower Interest Rates: Banks have maintained competitive lending rates, encouraging borrowing.
Digital Banking & NBFCs: Easier access to loans via online applications and fintech partnerships boosts lending volumes.
Government Support: Initiatives like credit guarantees for SMEs and priority sector lending stimulate bank credit.
3. Implications for the Economy
Business Expansion: Easy access to credit helps companies invest in infrastructure, machinery, and technology.
Boost to Consumption: Retail lending fuels spending on housing, vehicles, and durable goods.
Financial Inclusion: Growth in lending, especially to tier-2 and tier-3 cities, enhances inclusion.
Inflation Considerations: Rapid credit growth may increase demand-driven inflation, which the RBI monitors closely.
4. Challenges & Risks
Rising Retail Delinquencies: With increased lending, the risk of default on personal loans and credit cards may rise.
Corporate Debt Stress: Over-leveraging by companies could affect asset quality if growth slows.
Interest Rate Fluctuations: RBI’s policy rate changes can impact floating rate loans and bank profitability.
Regulatory Oversight: Ensuring responsible lending practices is crucial to prevent future NPAs.
FAQs
Q1: What caused the 10.3% YoY increase in bank lending?
Primarily due to higher corporate borrowing, retail credit demand, and government-supported credit schemes.
Q2: Which sectors are driving credit growth?
Corporate lending (infrastructure, industrial expansion), retail loans (housing, personal loans), and SMEs.
Q3: How does lending growth impact the economy?
It supports business expansion, boosts consumer spending, and promotes financial inclusion, contributing to GDP growth.
Q4: Are there risks associated with higher lending?
Yes. Rising retail delinquencies, corporate debt stress, and inflationary pressure are potential concerns.
Q5: Will bank lending continue to grow in 2025–26?
If economic conditions remain stable and credit demand persists, moderate growth in lending is expected, though regulators will monitor risks closely.
Published on : 4th October
Published by : SMITA
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