The credit growth of banks to stay low, since companies use other sources of financing in the low interest regime: SBI report

The report noted that companies tend to avoid bank loans when the interest rates are low and instead explore other sources of financing.

The credit growth of banks in the country will probably remain low, because companies will continue to opt for alternative financing methods in the current environment with low interest rates, according to a report from the State Bank of India (SBI).

The report noted that companies tend to avoid bank loans when the interest rates are low and instead explore other sources of financing.

It stated: “Bank credit to stay low, because companies use other financing options in the low interest regime.”

The report has analyzed data on source flows in the last eight years and noted that during periods such as FY21 and FY22, when the interest rates were low, companies were usually dependent on non-banking sources for collecting funds. The same pattern now seems to repeat.

The share of incremental bank credit in the total current current is expected to fall from 31.3 percent in FY25 to only 22 percent against the second quarter of FY26.

Currently, the head growth of the head is 9.5 percent from June 2025, while non-bank resources are growing at a much faster pace of 15.6 percent.

The report expects it to stay muted in FY26. It stated that credit growth by planned commercial banks (SCBs) delayed up to 9.8 percent from 11 July 2025, compared to a robust growth of 14.0 percent in the same period last year.

Between April and July of this year, the bank credit increased by £ 2.19 Lakh Crore, with a year to date (YTD) growth of 1.2 percent.

In the same period last year, the credit had grown by £ 3.79 Lakh Crore or 2.3 percent YTD.

In the meantime, deposits grew by £ 7.45 Lakh Crore (3.3 percent ytd) in the current year, slightly higher than the growth of £ 7.01 LAKH (3.4 percent YTD) that was seen last year.

The report also pointed to a shift in deposit patterns. Higher efficiency in the long term deposits have led to greater inflow into these instruments.

As a result, the share of savings reliefs decreased to 29.1 percent in March 2025 of 30.8 percent a year ago and 33.0 percent two years ago.

In the future projects that deposits will grow in the reach of 12-13 percent, while credit growth is expected to be between 10-11 percent in FY26.

Published on August 2, 2025