Survey In A Nutshell
The Industry largely retained a broadly constructive outlook on credit growth over the near term, with growing interest in sustainable finance opportunities, with renewable energy financing emerging as the segment with the strongest growth potential.
Meanwhile, Artificial Intelligence is perceived as the most disruptive development likely to reshape banking operations, and cybersecurity risk is seen as the most pressing challenge confronting banks.
In this round, 24 banks participated, including Public Sector Banks, Private Sector Banks, Foreign Banks, Small Finance Banks, and Cooperative Banks. The survey was carried out during January and February 2026.
The findings of the survey indicate that the banking sector holds a generally positive outlook on credit growth in the near term, supported by improving balance sheets, consistent economic activity, and sustained demand across various segments of the economy.
Most respondents anticipate that the current monetary policy stance will remain largely stable in the upcoming months, suggesting that the existing policy framework is suitably calibrated to balance growth and inflation considerations.
Public Vs Private
Expectations for overall credit expansion remain optimistic, with banks foreseeing continued momentum in non-food credit. Public Sector Banks seem particularly confident in their outlook, reflecting improved asset quality, stronger capital positions, and increasing traction in corporate lending.
Private Banks adopt a balanced and selective approach to credit growth, while Foreign Banks exhibit moderate optimism in line with their focused exposure to corporate and institutional segments.
Sector-wise, the demand for credit from the services and retail sectors is anticipated to continue being a significant factor in the overall growth of lending. The outlook for the services sector indicates strong expectations for expansion, bolstered by activities in real estate, financial services, logistics, and tourism-related industries.
Sector-Wise Analysis
Retail lending is also expected to remain strong, further solidifying its position as a fundamental component of growth within the banking sector.
Demand for credit from small and medium enterprises (SMEs) is projected to remain particularly robust, with survey respondents indicating high confidence in ongoing expansion within this segment.
Conversely, the growth of industrial credit is expected to progress at a more moderate pace, indicating a gradual recovery rather than a rapid surge. The outlook points to consistent investment activity driven by infrastructure development, sectors linked to manufacturing, and government-led capital expenditures.
It is also noted that demand for term loans is anticipated to be primarily influenced by infrastructure, real estate, the automotive sector and its components, pharmaceuticals; and emerging industries such as data centres and defence-related sectors.
In contrast, the demand for working capital appears to be more closely associated with trade cycles and the financing needs of operations.
Industries such as textiles, automobiles, pharmaceuticals, engineering goods, and food processing are expected to be the main drivers of industrial working capital borrowing, while the demand for working capital in services is likely to be led by wholesale and retail trade, transport operators, tourism, and hospitality.
The AI Disruptor
Artificial intelligence is widely regarded as the most transformative advancement expected to alter banking operations in the near future, especially in domains such as credit underwriting, risk evaluation, and collections.
The competition and collaboration with fintech and large technology platforms are also seen as major factors shaping the future banking business model.
The survey also points out that cybersecurity risk is the most urgent challenge facing banks today, reflecting the growing digitalisation of financial services and the necessity for enhanced technological resilience.
Going Sustainable
From a strategic viewpoint, banks are increasingly focusing on climate risk management and financial inclusion as essential priorities for the upcoming year, indicating the industry’s heightened commitment to sustainability and inclusive finance initiatives. Concurrently, traditional priorities like credit growth, asset quality management, and digital transformation continue to be vital elements of banks’ strategic planning.
The results further highlight the rising significance of sustainable finance opportunities, with renewable energy financing identified as the segment with the greatest growth potential. This is in line with the broader shift towards green investments and India’s long-term energy transition goals.
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