Indian banks expect credit growth to remain strong in the second half of 2026, with retail and small and medium enterprise lending emerging as key drivers. However, slower deposit growth relative to credit demand and geopolitical uncertainties remain major concerns, according to the 22nd round of the FICCI-IBA Bankers’ Survey released on October 28. Nearly three-fourths of the 22 banks surveyed expect non-food credit to grow at a mid-teens pace or higher year-on-year over the next six months, covering July to December 2026.

Almost all respondents expect growth of at least 10%, the survey found. The participating banks collectively account for more than three-fourths of India's total banking assets. Retail and SME lending are expected to remain the strongest areas of credit demand. More than four-fifths of respondents anticipate double-digit growth in both segments, while almost all expect SME credit to expand by at least 10%.Credit demand from industry is also expected to remain healthy.

In the services sector, more than three-fourths of respondents expect double-digit growth, with half projecting expansion at a mid-teens pace or higher. The outlook for agriculture and allied activities is positive, although expectations vary across banks. Infrastructure leads industrial loan demandWithin industry, infrastructure is expected to lead demand for term loans, followed by engineering goods, auto and auto components, electronics, and metals, iron and steel. Demand for working capital finance is expected to be driven by auto and auto components, followed by petroleum, coal and fuel products, food processing, chemicals, and metals, iron and steel.

In the services sector, NBFCs, tourism, hotels and restaurants, and commercial real estate are expected to lead term loan demand.

Trade, covering wholesale and retail activity, is expected to be the biggest driver of working capital requirements. Deposit growth and geopolitical risks weigh on outlookDespite the positive credit outlook, deposit mobilisation remains the biggest constraint to sustaining credit growth. About two-thirds of respondents identified slower deposit growth relative to credit demand as a key challenge, with the concern particularly pronounced among public sector banks. Economic and geopolitical uncertainties are also significant concerns, especially among private and foreign banks.

The survey found that geopolitical risks and supply-chain disruptions were the biggest impediments to a broad-based recovery in private sector capital expenditure, cited by around three-fifths of respondents. Global economic uncertainty was the next major concern, followed by a weak demand outlook. The findings suggest that greater certainty over the global and domestic business environment will be important for a sustained recovery in private investment. Deposit mobilisation tops banks' priorities for FY27Strengthening deposit mobilisation and banks' liability franchises is expected to receive the greatest management attention in FY27, followed by artificial intelligence and data-driven banking transformation, and cybersecurity and operational resilience.

The priorities differ across bank categories. Public sector banks rank AI-led transformation as their top priority, while private banks place the greatest emphasis on deposit mobilisation. Among government initiatives, the Emergency Credit Line Guarantee Scheme 5.0 is viewed by respondents as the measure likely to have the greatest positive impact on credit growth in FY27. Infrastructure and public capital expenditure programmes, followed by production-linked incentive schemes, are also seen as supportive.