The Indian corporate credit cycle has shifted noticeably through the past twelve months. The headline credit growth numbers have decelerated from the high-teens annual rates of 2023-24 to high single digits by Q1 2026. The composition has changed too. The picture from the RBI’s latest data and the conversations with bankers in mid-2026 is more nuanced than the simple slowdown narrative suggests.

This is a working read on where the cycle actually sits and what the recent regulatory signals are pointing toward.

What the headline numbers show

Corporate credit growth in the Indian banking system was running above 18% on a year-on-year basis through most of 2023 and into early 2024. By Q1 2026 that number has come down to roughly 9-10%. The deceleration has been steady rather than abrupt, which suggests it’s structural rather than crisis-driven.

The composition tells a clearer story. Working capital lending has held up better than term lending. The corporate borrowers who were drawing down term loans for capex through 2022-23 have largely completed those projects. The next wave of capex announcements has been more measured, partly because of cost pressures and partly because of demand uncertainty in some sectors.

The deceleration is also concentrated in specific sectors. Infrastructure and real estate corporate lending has slowed sharply. Manufacturing capex lending has slowed but less dramatically. Services sector lending has been more stable.

The NBFC dimension

The non-bank financial company sector has had a rougher 2025-26 than the banks. The funding environment for NBFCs has tightened. The RBI’s tightening of bank lending to NBFCs in late 2024 has continued to play through. Several mid-tier NBFCs have had to shrink their balance sheets or raise expensive equity to cover the funding gap.

The corporate credit market in India is more dependent on NBFCs than the headline banking numbers suggest. The deceleration in NBFC lending feeds through to the corporate borrowers who were dependent on NBFC channels — typically smaller and mid-tier corporates that don’t get the best bank pricing.

The result is that the actual credit availability for the corporate Bharat segment has tightened more than the bank-only credit growth numbers would suggest. This matters for understanding the on-ground picture.

What the RBI is signalling

The RBI commentary through Q1 2026 has been measured. The central bank has been clear that it sees the credit deceleration as healthy normalisation rather than as a problem requiring intervention. The repo rate trajectory has been steady. The macroprudential measures from 2023-24 have not been rolled back.

The signals on specific concerns have been more pointed. Asset quality in unsecured retail and personal loans is being watched. Concentration in certain sectors is being watched. The interaction of NBFC stress with bank lending to NBFCs is being watched.

The implicit message is that the regulator is comfortable with the current trajectory but is unwilling to ease the constraints that have produced it. Banks pushing for relaxation on risk weights or for loosening of large exposure norms have not been getting much sympathy.

Sectoral pictures

Real estate corporate credit has been the headline story. The post-RERA discipline and the consolidation among developers have reshaped the sector substantially. The credit available to developers in 2026 is more selective than it has been in years. The good developers can access credit at reasonable terms. The marginal developers can’t access bank credit at all and are dependent on NBFC and private credit channels.

Infrastructure credit has slowed for a different reason. The pipeline of projects has continued but the financing structures have shifted. More projects are being financed through bond markets and through specialised infrastructure debt funds rather than through traditional bank term loans. The banks are still in the picture but at a lower share than they were five years ago.

Manufacturing capex credit has held up better than feared. The PLI schemes and the broader manufacturing push have generated real project pipelines. The credit growth in this sector has been more measured than the announcement headlines might suggest, but it’s been growing rather than contracting.

Services sector credit, particularly to IT services and professional services, has been steady. The growth in these sectors generates credit demand at predictable rates.

What corporate borrowers are actually doing

The corporate treasurers I’ve talked to in 2026 are operating in a different environment than they were two years ago. The cost of bank debt has stabilised at higher levels than the previous decade. The bond market is more selective. Private credit has emerged as a meaningful alternative for the right kinds of borrowers.

The treasury strategies that have worked in this environment include diversifying funding sources, pre-emptively rolling debt rather than waiting until maturity, and maintaining higher liquidity buffers than were considered necessary in the easier credit environment.

The corporates that have struggled have been the ones with concentrated bank exposure that didn’t appreciate how the lending appetite of their primary banks could shift. Several mid-tier corporates that took bank lending availability as a constant have had to scramble to refinance with less favourable terms when their primary banks pulled back.

The credit quality picture

Asset quality in the corporate book has remained reasonable through the deceleration. Gross NPAs in corporate lending have stayed contained, partly because of better underwriting in the recent vintage of loans and partly because the larger corporate borrowers have been deleveraging through the cycle.

The credit quality concerns are concentrated in specific pockets. Mid-tier real estate. Smaller infrastructure projects. The MSME segment, which has its own dynamics. The unsecured retail segment, which has been the more visible concern in 2025-26.

The corporate credit story is, on balance, not a crisis story. It’s a normalisation story. The years of easy money are behind us. The current environment is more demanding for borrowers and more conservative for lenders.

What to watch

A few specific developments are worth watching through the rest of 2026.

The trajectory of the unsecured personal loan delinquencies. If they continue to deteriorate, the regulatory and bank response will spill over into corporate lending appetite.

The capex announcement pipeline. The Q1 2026 announcements were more measured than 2024. If Q2 sustains that pattern, the medium-term credit growth picture is more measured.

The NBFC sector. Continued stress in mid-tier NBFCs would feed through to corporate credit availability and could prompt regulatory response.

The bond market depth. India’s corporate bond market has grown but remains thin in some segments. Continued deepening would ease pressure on bank lending; continued thinness would maintain it.

The broader picture for India’s corporate credit cycle in 2026 is that the easy years are over and the discipline of the new environment is broadly healthy for the financial system. Borrowers who have adapted are doing fine. Borrowers who haven’t are finding the environment harder than they expected.