Indian banks are confident about lending, but worried about where the money to lend will come from. That is the gist of the latest FICCI-IBA Bankers Survey, released on October 28, 2026, which captures how 22 public sector, private and foreign banks see the six months from July to December 2026.
Together, those 22 banks hold more than three-fourths of India’s banking assets. Nearly three-fourths expect non-food credit to grow in the mid-teens or higher over the next six months. Almost all expect at least double-digit growth. Private banks are the most upbeat, with nearly nine in ten expecting mid-teen growth or better, while foreign banks expect a steadier, lower double-digit pace.
The survey was taken against a strong backdrop. Real GDP grew 7.8 percent in the April to June quarter of 2026-27 and real gross value added grew 8.2 percent. Consumer price inflation was 4.82 percent in August.
Retail and small business loans lead the way
If there is one clear message, it is that households and small businesses will drive the next leg of lending. More than four-fifths of respondents expect both retail loans and credit to small and medium enterprises to grow at a robust double-digit pace. Almost every bank surveyed expects double-digit growth in SME credit.
Credit to industry is also expected to stay strong. More than three-fourths expect services-sector credit to grow at a robust double-digit pace. Agriculture looks positive too: nearly three-fourths expect double-digit growth in farm and allied lending.
Inside industry, demand for term loans is expected to be led by infrastructure, followed by engineering goods, auto and auto components, electronics, and metals. Working capital demand is expected to be led by auto and petroleum, coal and fuel products. In services, term loan demand is expected to come first from non-banking finance companies, tourism and hotels, and commercial real estate.
The deposit problem banks cannot ignore
None of this optimism hides the main constraint. About two-thirds of respondents named slower deposit growth, relative to credit demand, as the biggest obstacle to sustaining healthy credit expansion. The worry is sharpest among public sector banks, where a large majority flagged it. Among private banks, 44 percent pointed to deposit growth and 45 percent to economic and geopolitical uncertainty.
Put simply, loans are growing faster than the deposits that fund them. That gap is why deposit mobilisation is expected to get the most management attention in 2026-27, ahead of artificial intelligence and data-led banking transformation, and cybersecurity. The survey also notes recent steps to attract foreign-currency deposits, including flexibility for FCNR(B) deposits, which banks expect to help their funding base.
Actual lending is already running hot
Rating agency ICRA said on October 27 that bank credit growth is expected to stay healthy at 15.1 to 15.9 percent in 2026-27, with incremental credit of Rs 32.3 lakh crore to Rs 33.8 lakh crore, up from Rs 29.2 lakh crore in 2025-26. Credit growth had touched 21.4 percent as of September 30, 2026. ICRA expects growth to moderate from that pace, partly because of a high base, but not to fade.
One caution runs through the survey. Around three-fifths of banks see geopolitical risks and supply-chain disruptions as the biggest impediment to a broad revival in private-sector capital expenditure, followed by global uncertainty. The problem is not mainly the cost of borrowing. It is confidence. Companies want to be surer about the operating environment before they commit to large new projects.
On policy, banks picked ECLGS 5.0, the latest emergency credit guarantee scheme, as the initiative likely to have the greatest positive impact on credit growth in 2026-27.
What it means for borrowers
For households and small businesses, the message is encouraging but not unconditional. Banks want to lend, and retail and SME loans are at the top of their list. At the same time, the deposit squeeze and the Reserve Bank’s shift to calibrated tightening, after it raised the repo rate to 5.5 percent in October, mean lenders will be choosier about pricing.
Borrowers with clean repayment records and clear cash flows should still find banks willing to talk. For savers, the deposit pressure could mean better fixed deposit rates, though nothing in the survey guarantees that. The overall picture is of a banking sector optimistic for a reason, but clear-eyed about the limits. Lending demand is there. The question is whether deposits, and business confidence, can keep pace.
FAQs
What did the FICCI-IBA survey find?
Nearly three-fourths of 22 surveyed banks expect non-food credit to grow in the mid-teens or higher year on year over the next six months, with almost all expecting at least double-digit growth.
Which loans are expected to grow fastest?
Retail and SME lending lead the outlook, with more than four-fifths of banks expecting robust double-digit growth in both segments.
What is the biggest constraint on credit growth?
About two-thirds of respondents cited slower deposit growth relative to credit demand as the biggest constraint, ahead of economic and geopolitical uncertainty.
What does ICRA expect for bank credit in FY27?
ICRA expects credit growth of 15.1 to 15.9 percent in 2026-27, with incremental credit of Rs 32.3 lakh crore to Rs 33.8 lakh crore.
What is holding back private investment?
Around three-fifths of banks cited geopolitical risks and supply-chain disruptions as the main impediment to a broad private capital expenditure revival.
Figures quoted are survey expectations and agency projections, not final lending data.
