Banks have seen a reversal in lending trends over the past year, with retail loan growth slowing while corporate lending picked up in the June quarter after a resurgence in the second half of 2025-26.
For the quarter ended 30 June, several large and mid-sized banks reported corporate loan growth outpacing retail loan growth, which slowed largely owing to normalization in unsecured loan growth and in some secured loan segments, such as vehicle and housing loans.
Banks attributed the strong growth momentum in corporate loans to a pick-up in demand from sectors such as renewables, power and data centres.
Retail vs corporate loan growth
Retail loans at most large banks grew 7-12% year-on-year in the June quarter, with State Bank of India the outlier at 15%. Corporate loan growth was stronger, at around 10-18%, with Axis Bank reporting the highest growth of 38%.
SBI chairman C.S. Setty said, in the post-Q1 earnings conference on 7 August, that overall growth in the housing sector “seems to be slightly slower in Q1” than expected, even though the bank has gained market share in the segment. Further, auto loans experienced a slowdown due to the lender's caution amid aggressive pricing in the segment.
“We were not too happy with the pricing on these auto loans. Many people are aggressively pricing, and we will be really figuring out our strategy in terms of what we need to do on auto loans,” Setty said.
"For vehicle loans, the first half tends to be slightly weaker and then in the second half things pull back quite a bit because festive season happens, collections come in and things normalise. Mortgage has slowed down because there was massive growth in the 2-3 years post covid. So now it's mostly normalisation of demand," said Karan Gupta, head–financial institutes, India Ratings.
However, if the West Asia crisis continues and depending on how the monsoons play out, there could be some impact on the retail side, he said, adding that even so gold loans should continue to see strong growth.
Some banks also saw slower agriculture loan growth, which they attributed to cyclical trends. Lending under the agriculture segment is typically higher in the second and fourth quarters, in line with the sowing seasons for various crops.
Others, such as HDFC Bank and Axis Bank, reported a slowdown in unsecured retail loans, such as personal loans and credit cards, but said that disbursements have started picking up and should help grow the book over the next few quarters.
Axis Bank executive director Subrat Mohanty, in the post-earnings call on 18 July, said that disbursements across retail loan segments have improved and should support loan growth going ahead as the bank is pushing for growth across product lines.
“Our retail disbursement growth trends over the last three quarters, including this quarter, have been at about 18%. That disbursement trend will eventually translate to book growth, which is happening gradually,” Mohanty said.
“Retail loan growth for the industry has also picked up to 16% as of June 2026. The unsecured segments, including consumer durable financing and credit cards, have slowed down at -1% and 2% on-year, while the segment that is growing very strongly is loans against gold, growing at around 100% on-year,” Kotak Institutional Equities said in a note dated 11 August.
“Loan growth in the corporate sector saw a few one-off factors, probably led by higher drawdowns due to current geopolitical tension which required corporates to keep excess buffer in their balance sheets, secure inventory or ensure minimal disruptions of the underlying on-going capex,” the brokerage firm said in the note.
It added that even as corporate loan growth has picked up to around 20% on-year, most large private banks seem comfortable to grow in this segment.
"Corporate lending should continue to improve. For the last so many years, growth was quite muted and corporates aren't leveraged. Given the healthy internal accruals margins for most corporates, for them to plough that back into brownfield projects or otherwise, seems like a likely output. So that part is going to remain healthy," India Ratings' Gupta said.
On the other hand, some banks, such as Bank of Baroda and Indian Bank, where retail loan growth outpaced corporate loans, the pace of growth was largely led by the surge in gold loans, which was the fastest growing segment for the banking sector as a whole.
At the system level, bank credit to industry rose 19.2% year-on-year as of 30 June 2026, while retail loans grew 11.7%, according to the latest sectoral deployment data from the Reserve Bank of India.