Bank Lending to India's Commercial Sector Rises 55.4% in April-August FY27

Bank lending to India’s commercial sector experienced a sharp increase during the April-August period of the current financial year (FY27), according to the Finance Ministry’s October Monthly Economic Review. During the same five-month period, corporate bond issuances by non-financial companies declined as bond yields moved higher.

The report highlighted that total financial resources flowing to the commercial sector from both bank and non-bank sources rose by 55.4 per cent to reach Rs 17.5 lakh crore during April-August FY27. This compares with Rs 11.2 lakh crore recorded in the corresponding period of the previous year.

Non-food bank credit served as the primary source of this financial growth, amounting to Rs 9.8 lakh crore compared to Rs 3.8 lakh crore a year earlier. Conversely, corporate bond issuances by non-financial entities fell from Rs 1.5 lakh crore to Rs 0.3 lakh crore over the same timeframe as yields increased. This shift points to bank lending as the principal contributor to business fundraising, while the corporate bond market experienced a slowdown.

Overall bank credit growth maintained a strong pace. As of September 30, total bank credit registered an increase of 21.6 per cent, up from 10.4 per cent a year ago. Non-food credit similarly posted a growth rate of 21.4 per cent.

Lending activity was supported by robust demand across major economic sectors. Credit to industry grew by 18.2 per cent year-on-year in August 2026, marking a significant rise from 7.0 per cent in the same period last year. Disaggregating industrial lending, credit to medium industries increased by 31.8 per cent, micro and small industries grew by 23.0 per cent, and large industries expanded by 14.9 per cent.

The services sector also reported strong credit growth at 24.3 per cent year-on-year. Within services, lending to shipping and computer software services increased by 25.6 per cent and 41.8 per cent, respectively.

The Finance Ministry anticipates that the positive momentum in bank lending will persist through the remainder of the financial year. Supporting this outlook, the Reserve Bank of India’s (RBI) bank lending survey for the second quarter of FY27 showed that banks reported stronger loan demand across various sectors. The loan demand net response climbed to 46.7 from 32.1 in the preceding quarter.

Furthermore, banks expect demand to remain resilient in the third quarter, with the expectations net response registering at 43.3. These findings demonstrate continued reliance on bank financing among businesses, even in an environment marked by higher borrowing costs and financial market uncertainty.

"The sharp rise in bank lending to the commercial sector highlights a clear shift in how businesses are raising capital amid rising bond yields. With non-food bank credit surging and strong credit growth across medium, small, and large industries, banks have clearly stepped up to support economic activity. For businesses, particularly growing enterprises and MSMEs, maintaining strong banking relationships will be crucial as borrowing costs and market conditions continue to evolve through the rest of the financial year." — Dr. Shishir Gupta, Founder & CEO, StartupLanes