India's credit growth surges to ₹44.6L crore in FY26
What's the story
India's formal loan systems have witnessed a massive surge in the fiscal year 2025-26 (FY26), with credit expansion hitting ₹44.6 lakh crore. This is a major recovery from an 8% contraction seen in the previous fiscal year. The Reserve Bank of India (RBI)'s policy rate cuts and liquidity infusion are credited for this revival in borrowing demand across the country.
Policy impact
RBI's measures to spur lending
The RBI's measures to spur lending include a cumulative 125 basis points cut in policy rates and a 100 basis points reduction in the cash reserve ratio, both starting February 2025. The central bank also injected ₹8.8 lakh crore of liquidity through government bond purchases during this period. These actions have directly contributed to the increase in credit expansion for FY26.
Rate transmission
Lending rates come down to 9%
The RBI's policy rate cuts have resulted in a transmission of 87 basis points in lending rates. These rates have come down to 9% in February 2026, from 9.87% a year ago. This reduction has further fueled the revival of borrowing demand across India's formal loan systems, contributing to the overall credit expansion for FY26.
Sectoral growth
Outstanding non-food credit
Outstanding non-food credit to the commercial sector stood at ₹213 lakh crore as of March 31, 2026. This is a 16% increase from a year earlier. The resources raised from non-bank sources also rose by 15.6% to ₹99 lakh crore during this period, further highlighting the growth in India's formal loan systems and borrowing demand across different sectors of the economy.