Is India's Corporate Credit Set to Grow?

• Banks optimistic, SBI targets 10% corporate credit growth, Rs 7L cr loan pipeline.
• Icra cautious, sees Oct surge as transient, cites ECB & rate cut anticipation.
• Icra raises FY26 credit expansion forecast to Rs 19.5-21 lakh crore.

In the Indian financial landscape, predictions about corporate credit expansion are constantly evolving. While some banks express optimism, others, like Icra, are more cautious. This article unravels the current situation, examining the factors influencing corporate lending and offering insights into future credit growth trends, including both short-term fluctuations and long-term forecasts.

Credit Growth Outlooks

Major banks in India have begun to adjust their forecasts for corporate credit expansion upwards, signaling a more positive outlook. However, Icra, a prominent rating agency, suggests that a significant revival in corporate lending is yet to materialize. Ajay Gupta, Senior VP at Icra, has indicated that the recent surge in demand, specifically in October, might be transient. He believes that the increase could stem from corporations borrowing from banks in anticipation of a potential rate cut, before committing to bonds. The Reserve Bank of India's (RBI) relaxed rules for external commercial borrowing (ECB) coupled with lower global interest rates could also motivate Indian corporations to seek funding options internationally. SBI's chairman, C S Setty, revealed that the bank has revised its corporate credit growth target to 10% from the previous single-digit expectation, with a loan pipeline of Rs 7 lakh crore. SBI projects an overall credit growth of 12-14%. Bank of Baroda is also forecasting a 10-11% rise in corporate credit growth, and overall lending growth of 11-13%.

Icra's Revised Projections

Icra has marginally adjusted its perspective on overall bank credit growth to a range of 10.7-11.5%, a slight increase from its earlier estimate of 10.3-11.4%. This adjustment is attributed to the positive impact of GST cuts and liquidity support facilitated through the CRR reduction. In its most recent update, Icra has increased its projection for credit expansion in the fiscal year 2026 to between Rs 19.5-21 lakh crore. This represents an increase of Rs 0.5 lakh crore from the previous projection. Sachin Sachdeva, VP and Sector Head at Icra, noted that the first half of fiscal year 2026 has witnessed an incremental credit offtake of Rs 10.1 lakh crore, with a significant expansion occurring in September. These figures paint a picture of cautious optimism, influenced by both internal and external economic factors shaping the trajectory of corporate credit in the Indian market.