India needs more credit to become a developed nation by 2047
India must significantly expand the reach of credit—specifically aiming for a 60-65% Credit-to-GDP ratio—to achieve its target of becoming a developed nation by 2047, according to banking leaders at the Mint Conclave.
MUMBAI : India needs to extend the reach of credit in the economy for it to become a developed nation in a little over two decades, even as companies increasingly move away from traditional bank financing, panellists said at Mint’s BFSI Conclave.
They said that the availability of alternative financing options for companies, coupled with the difficulty in getting bank deposits, has led to a structural change in the pace of credit growth. The government has set a target for India to become a developed nation by 2047.
“India's banks' credit to GDP is almost around 55%, and to be a developed country, I think we need to push it to something around 60-65%," said Debadatta Chand, chief executive, Bank of Baroda.
Chand said that apart from agriculture and small businesses, significant economic development is linked to bank credit. He said that the Bank of Baroda witnessed muted corporate loan growth in the first six months of the financial year but expects a pickup in the second half, or October-March.
Shifts in corporate financing
According to Rajiv Anand, chief executive of IndusInd Bank, the composition or ability to garner cheaper deposits is expected to change going forward. Therefore, the days of just looking at credit growth as it is—at least in the medium term—are over, because now the corporate has multiple ways to finance their capital structure, local equity, global equity, local bonds, global bonds, and bank loans.
“I do agree that we will continue to be large lenders to the MSME (micro, small and medium enterprises) sector, we'll be reasonably large lenders to the retail side, but I think corporates will continue to have larger opportunities for them to be able to finance themselves," said Anand.
Anand said that since private capex in India is relatively weak, it would be surprising if there is any material increase in corporate credit growth in the days to come.
Mint reported in September how a combination of factors has pushed companies away from bank loans. These include cheaper debt available in the market compared to bank loans, a push to deleverage and replace high-cost loans with lower-cost alternatives, and uncertainties surrounding US President Donald Trump’s tariff policy shifts.
Non-food credit growth at 11.4% year-on-year (y-o-y) at the end of November, reaching ₹194.5 trillion, was higher than deposit growth in the same period. Deposits increased 9.2% year-on-year to ₹242.6 trillion during the same period.
Companies have raised funds worth ₹20 trillion in the first seven months of FY26, with 55.4% of it being raised from banks. For the entire FY25, the share of bank loans was 60.4%. Although a clearer picture will emerge only after the full-year data is available, it is evident that corporates are moving away from banks.
Capital markets outlook
Others said that in developed markets, a majority of corporate financing is through the debt markets.
“As India is also moving from where it is to the developed market state, I think the avenues of capital that a company can tap is much, much more today, compared to traditionally looking at the bank as the main capital provider," said K. Balasubramanian, CEO and banking head for Citi India, as well as banking head for the Indian subcontinent.
Balasubramanian said that large corporates are looking at banks as a backstop. “They ideally would want to go into the capital market with equity or debt, both international as well as domestic, as against earlier when all were coming into the local bank market," he said.
“In the US, the size of the bond market is actually three times the size of the banks (banking industry). That is how deep the bond market is, and I would expect that over the next several years, that is the direction of the journey for India as well."
Companies have raised ₹5.44 trillion through the private placement of bonds and ₹6,112.8 crore through public bonds as of October this financial year, according to data from the Securities and Exchange Board of India (Sebi). In FY25, companies raised ₹9.87 trillion through private placements and an additional ₹8,149.04 crore in public issuances.
Meanwhile, banking industry leaders are also keenly awaiting certain changes in 2026. Some are worried about the disruption that artificial intelligence could cause, given the considerable uncertainty surrounding its true impact. There are also those who are looking forward to the year for better growth in current and savings account deposits—an area that has eluded banks for some time now. Lastly, there is also the big question around tariffs and how that pans out will have an impact on the domestic equity markets.
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