The reported lending growth was the strongest in more than four years. Part of the increase reflects reporting changes introduced in December 2025. After allowing for those changes, Bernstein puts underlying growth at around 18%, with demand spread across several lending segments.

Industrial borrowing is a key contributor. Large businesses, which account for 70% of industrial credit, are borrowing strongly, while lending to micro, small and medium enterprises remains healthy. Within services, credit to non-banking financial companies has expanded by over 30%. Higher bond-market rates are encouraging these lenders to seek cheaper bank funding.

Deposits, however, are not expanding at the same pace. The elevated loan-to-deposit ratio means a greater share of deposit funding is committed to lending, leaving a smaller liquidity cushion. This makes the balance between fresh credit and deposit collection an important concern for banks.

Profitability remains supported by stable margins. The spread between rates on fresh loans and term deposits is healthy, while lower spending on certificates of deposit is helping contain funding costs. Bad loans remain manageable, and improving credit costs have supported profitability near a decade high.

The report gives a loan-growth outlook of 13–15% for FY27. It also flags possible policy tightening by the government or RBI later in the year as a factor that could moderate lending.