They stated that the availability of alternative financing options for companies, together with difficulties in obtaining bank deposits, led to a structural change in the rate of credit growth. The government has set a target to make India a developed country by 2047.
“Indian banks’ credit to GDP is almost around 55% and to be a developed country, I think we need to push it down to something around 60-65%,” said Debadatta Chand, CEO of Bank of Baroda.
Chand said that apart from agriculture and small businesses, significant economic development is associated with bank credit. He said Bank of Baroda witnessed subdued growth in corporate loans in the first six months of the financial year, but expects an acceleration in the second half, i.e. October-March.
Shifts in corporate financing
According to Rajiv Anand, CEO of IndusInd Bank, the composition or ability to collect cheaper deposits expected change forward direction. So the days of just looking at credit growth as it is – at least in the medium term – are gone as now the company has multiple ways to finance its capital structure, local equity, global equity, local bonds, global bonds and bank loans.
“I agree that we will continue to be a large lender to the SME sector (micro, small and medium enterprises), we will be a reasonably large lender to retail, but I think corporates will continue to have more opportunities for them to self-finance,” Anand said.
Anand said that given that private equity spending in India is relatively weak, it would be surprising if there is any substantial pick-up in corporate credit growth in the coming days.
Mint reported in September how a combination of factors had pushed companies away from bank loans. These include cheaper debt available in the market compared to bank loans, pressure to deleverage and replace high-cost loans with cheaper alternatives, and uncertainty surrounding changes to US President Donald Trump’s tariff policy.
Growth of non-food loans at the end of November by 11.4% year-on-year (year-on-year) ₹194.5 trillion, was higher than the growth in deposits over the same period. Deposits grew by 9.2% year-on-year. ₹242.6 trillion during the same period.
Companies have raised funds worth ₹20 trillion in the first seven months of FY26, of which 55.4% was raised from banks. For the whole of FY25, the share of bank loans was 60.4%. Although a clearer picture will emerge once full-year data is available, it is evident that corporates are moving away from banks.
Capital Markets Outlook
Others said that in developed markets most corporate financing is through debt markets.
“As India is also moving from a legacy state to a developed market state, I think the capital options that a company can tap into today are much, much more, compared to the traditional view of the bank as a major provider of capital,” said K. Balasubramanian, Citi India’s CEO and Head of Banking, as well as Head of Banking for the Indian Subcontinent.
Balasubramanian said big corporates look at banks as an insurance policy. “Ideally, they would like to go to the capital market with equity or foreign capital, both international and domestic, as opposed to before when everyone was coming to the local banking market,” he said.
“In the US, the size of the bond market is actually three times the size of the bond market banks (banking). That’s how deep the bond market is and I would expect that to be the direction of travel for India as well in the next few years.”
Companies have increased ₹5.44 trillion through private placement of bonds and ₹6,112.8 crore through public bonds as of October this financial year, according to Securities and Exchange Board of India (Sebi) data. In FY25, the company grew ₹9.87 trillion through private placements and others ₹8,149.04 crore in public issues.
Meanwhile, banking industry leaders are also eagerly anticipating some changes in 2026. Some fear the disruption that AI could cause, given the considerable uncertainty surrounding its actual impact. There are also those looking forward to a year of better growth in checking and savings deposits – an area that has eluded banks for some time. Finally, there’s also the big question of tariffs and how that will impact domestic equity markets.
