Survey Overview
The industry maintains a predominantly optimistic outlook on credit growth in the near term, with an increasing interest in sustainable financing options, particularly in renewable energy financing, which is recognized as having the strongest potential for growth.
Furthermore, Artificial Intelligence is viewed as the most significant disruption likely to transform banking operations, with cybersecurity risks identified as the primary challenge facing banks today.
This round of the survey included 24 banks, comprising Public Sector Banks, Private Sector Banks, Foreign Banks, Small Finance Banks, and Cooperative Banks. Conducted during January and February 2026, the survey presents insights from a diverse range of institutions.
Results indicate that the banking sector holds a generally upbeat outlook on credit growth, bolstered by healthier balance sheets, steady economic activity, and consistent demand across various economic sectors.
Most participants expect the current monetary policy to remain stable over the coming months, suggesting that the existing framework is well-adjusted to balance both growth and inflation considerations.
Public vs. Private Sector Insights
Expectations for overall credit expansion are optimistic, with banks predicting sustained momentum in non-food credit. Public Sector Banks exude particular confidence in their outlook, reflecting improvements in asset quality, stronger capital positions, and growing activity in corporate lending.
Private Banks, on the other hand, are adopting a selective approach to credit growth, while Foreign Banks display moderate optimism in alignment with their targeted focus on corporate and institutional sectors.
In sector-specific terms, demand for credit from the services and retail sectors is expected to remain a key driver of overall lending growth. The outlook for the services sector is particularly strong, driven by activities in real estate, financial services, logistics, and the tourism industry.
Sector Analysis
Retail lending is expected to continue its strong performance, solidifying its role as a cornerstone of growth within the banking sector.
Survey respondents project that demand for credit from small and medium enterprises (SMEs) will remain notably robust, reflecting high confidence in ongoing growth in this segment.
In contrast, industrial credit growth is anticipated to advance at a more measured pace, indicating a gradual recovery rather than a rapid increase. Expected consistent investment activity is linked to infrastructure development, sectors tied to manufacturing, and government-driven capital expenditures.
Moreover, demand for term loans is expected to be primarily influenced by infrastructure, real estate, the automotive industry and its components, pharmaceuticals, and burgeoning sectors like data centers and defense.
Conversely, the demand for working capital seems more aligned with trade cycles and operational financing needs.
The AI Disruption
Artificial Intelligence is increasingly recognized as the most transformative advancement expected to revolutionize banking operations in the near future, particularly in areas like credit underwriting, risk assessment, and collections.
Competition and collaboration with fintech and major technology platforms are also recognized as key factors shaping future banking business models.
The survey emphasizes that cybersecurity risk is the pressing challenge confronting banks, highlighting the growing digitalization of financial services and the urgent need for enhanced technological resilience.
Pursuing Sustainability
Strategically, banks are placing greater emphasis on climate risk management and financial inclusion as key priorities for the coming year, demonstrating the industry’s increasing commitment to sustainability and inclusive finance initiatives. Meanwhile, traditional objectives such as credit growth, asset quality management, and digital transformation remain essential components of banks’ strategic planning.
The findings further underline the growing relevance of sustainable finance opportunities, with renewable energy financing recognized as the segment with the highest growth potential. This aligns with the broader shift toward green investments and India’s long-term energy transition aspirations.
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