Commercial credit increases by 15% in a year as interest rate cuts stimulate demand

Outstanding credit to the commercial sector crossed Rs 300 lakh crore at the end of January, up 14.7% year-on-year, signaling a pick-up in loan demand in response to the Reserve Bank of India’s (RBI) 125 basis point cut in policy rates over the past year to boost growth. One basis point is one hundredth of a percentage point.

Incremental credit growth in the first ten months of this fiscal stood at Rs 34.5 lakh crore, up 35% over the corresponding period, data released by the RBI in its latest monthly bulletin showed.

The gap between bank credit and non-bank credit sources widened in January over the corresponding period.

“This shows that banks have regained ground in lending,” said Madan Sabnavis, chief economist at Bank of Baroda. The gap between banking and non-banking sources widened to Rs 9 lakh crore for the ten months ending January 2026. The gap was as small as Rs 2.5 lakh crore in the ten months ending January 2025.

“The increase in credit offtake reflects the impact of the combination of interest rate cuts by the RBI and significant liquidity infusion,” said Gaura Sen Gupta, chief economist at IDFC First Bank.

Of the incremental flows of Rs 34.5 lakh crore, bank credit to the commercial sector rose by almost Rs 21.7 lakh crore. Non-bank sources (net of bank credit) stood at Rs 12.6 lakh crore. These include non-bank finance companies, housing finance companies, corporate bonds, commercial paper, foreign loans and equity issues.

The decline in the share of incremental credit flow from non-banking sources in the ten months ended January is reflected in a decline in equity issuances, which fell 12% to Rs 2.97 lakh crore.

However, NBFCs led the growth in outstanding loans with a growth of 20%, surpassing the 14% credit growth of commercial banks.