New Delhi:
Indian banks reported strong credit growth in the third quarter (Q3), supported by accommodative Reserve Bank of India (RBI) policies and recent GST rate rationalisation, which together boosted borrowing sentiment across key sectors.

Lending momentum gathers pace

According to banking sector data and management commentary, loan growth remained healthy across retail, MSME, agriculture, and select corporate segments. Lower compliance burdens due to GST rate cuts and improved cash flows encouraged businesses to expand operations and seek fresh credit.

Retail lending — particularly housing, vehicle, and personal loans — continued to be a major driver, aided by stable interest rates and festive season demand.

RBI policy provides stability

Bankers credited the RBI’s policy stance for maintaining liquidity comfort and ensuring orderly transmission of rates. By keeping borrowing costs predictable and supporting liquidity through targeted measures, the central bank helped sustain credit demand without triggering inflationary pressures.

A senior public sector bank executive said policy consistency has improved confidence among borrowers, especially small and mid-sized enterprises planning medium-term investments.

MSMEs and services lead demand

MSMEs emerged as a key contributor to credit growth, benefiting from lower GST rates on select goods and services, faster input tax credit processing, and easing working capital stress. Service sectors such as logistics, hospitality, healthcare, and education also saw increased loan uptake.

Private banks reported strong traction in unsecured and digital lending, while public sector banks showed improvement in corporate and infrastructure-related advances.

Asset quality remains stable

Despite rapid credit expansion, banks indicated that asset quality indicators remained stable in Q3. Improved recoveries, controlled slippages, and cautious underwriting helped keep non-performing assets under check.

Analysts believe stronger balance sheets and higher capital adequacy have given banks the confidence to grow their loan books without compromising risk discipline.

Outlook for coming quarters

Industry experts expect credit growth to remain resilient in the near term, driven by government capital expenditure, infrastructure projects, consumption demand, and continued policy support. However, banks are likely to stay selective amid global economic uncertainty and inflation risks.

Overall, Q3 performance signals sustained momentum in India’s banking sector, reflecting a supportive policy environment and improving borrower confidence.