RBI Data Shows 64% Of Bank Credit Below 9% As Margin Pressure Builds For Lenders

Close to two-thirds of all bank credit in India now carries interest rates below 9%, according to fresh RBI data, as a sustained period of rate cuts worked its way through the lending system. Within term loans, which make up 62.8% of total bank credit, as many as 80.2% are now priced below 10%.

According to experts, lending rates are falling faster than deposit rates, which is squeezing net interest margins at banks and could dent profitability over the coming quarters.

Credit Growth Picks Up Pace

Overall bank credit grew 14.1% year-on-year as of end-March 2026, a step up from 11.1% a year earlier. Growth held up across all geographies, with rural, semi-urban, urban and metropolitan areas all recording double-digit expansion. Metropolitan branches carried the largest share of total lending at 58.2%.

Public sector banks held on to their dominance with a 52.9% share of total credit, while private sector banks accounted for 39.4%. Private banks showed a sharper acceleration, with credit growth climbing to 12.3% from 9.5% a year ago. Public sector banks grew at a pace above the overall system rate.

Where The Growth Is Coming From

Loans to the private corporate sector, which account for just over a quarter of total bank credit, grew 15.5% year-on-year, up from 11.9% the previous year. Agriculture credit expanded 14.4% against 8.1% a year ago, while industrial credit grew 12%, compared to 9.4% the year before.

Personal loan growth, on the other hand, cooled to 12.9% year-on-year, dipping below overall credit growth for the first time after consistently outpacing it over the past several years. Despite the slowdown, personal loans still account for 30.7% of total bank credit.

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Households Driving The Bulk Of Borrowing

The household sector continues to be the biggest driver of credit growth. Household borrowings grew 14.3% year-on-year and now account for 58.6% of total bank credit. Households also contributed around three-fifths of all fresh credit extended during FY26, underlining their central role in keeping loan book growth ticking across the banking system.

Source:

Economic Times