Incremental flow of credit to the commercial sector stood at ₹20 lakh crore in the first seven months of FY26 ending October 31, compared with ₹16.23 lakh crore in the same period last year, data published by the Reserve Bank of India (RBI) showed.
This fresh credit comprised ₹11.12 lakh crore of bank loans and ₹3.95 lakh crore availed from non-banking sources such as non-banking finance companies, bonds raised by corporates, commercial papers, external commercial borrowings (ECB) and equity raised by companies.
“Data shows revival in business and investment activity. Both bank credit and other domestic sources, especially bonds, have grown at a smart rate,” said Madan Sabnavis, chief economist, Bank of Baroda. “This augurs well for the balance five months as the economy looks poised to grow by 7% or more this year.”
A detailed analysis of the credit data shows that non-banking channels contributed significantly to credit expansion. For instance, bank credit rose 11% on a year-on-year basis, while credit availed through non-banking sources rose 39%, albeit on a smaller base.
Corporates have relied on the bond and ECB markets to meet their credit requirements, largely due to easing of policy rates by RBI and the Federal Reserve.
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Local Bonds, ECBs
In the first seven months of this fiscal year, corporates raised ₹2.25 lakh crore from the bond market, up 473% over the comparable period last year. Similarly, corporates raised the equivalent of ₹25,475 crore via the ECB route versus repayments of ₹792 crore in the same period last year.
RBI Governor Sanjay Malhotra pointed to this trend during the August monetary policy review.
“As transmission to money markets has been faster, large corporates increasingly relied on market-based instruments such as commercial paper and corporate bonds to source funds, reducing their reliance on bank credit,” Malhotra stated in the August policy review.
The central bank has lowered the repo rate – the key policy rate – by 100 basis points since February after a two-year pause.
One basis point is a hundredth of a percentage point.
Outstanding credit to the commercial sector also expanded 13% to ₹288 lakh crore as of October 31, 2025, compared with 12% expansion in the corresponding period last year.
Gauging demand for credit, State Bank of India (SBI) raised its FY26 credit growth target to 12-14% from 11% projected earlier.
This included Rs 193.2 lakh crore of bank loans, up 11% year-on-year, and Rs 95 lakh crore from non-banking sources, which rose 17.2% year-on-year.
In the first seven months of FY26, corporate bonds and NBFCs have emerged as the largest sources of funds for corporates. Outstanding loans by NBFCs (net of bank borrowing) stood at Rs 35.8 lakh crore, higher than Rs 33.3 lakh crore lent by these finance companies in the whole of last fiscal year.
Similarly, in the period under review, issuance of outstanding corporate bonds was at Rs 22.48 lakh crore, higher than Rs 20.23 lakh crore in the first seven months last year.
