Indian corporate credit growth in the first half of FY27 (Indian fiscal calendar) has eased from the peaks of FY25 but the underlying picture is structurally healthy. The May 2026 read from the larger Indian commercial bank teams is a story of moderation, not retreat, and the composition of the demand is shifting in ways that matter for FY27 lending strategy.

Three observations from the data:

Capex demand is the strongest segment. The infrastructure and manufacturing capex cycle that started with the production-linked incentive programmes in 2023 is now in a delivery phase. Capex-linked corporate credit is growing at a healthy double-digit rate year on year and is broadly priced. The borrower base is dominated by mid- and large-cap manufacturers, infrastructure operators, and a smaller share of new-economy companies funding capacity expansion.

Working capital demand has moderated. The 2024 working capital expansion that came with the post-COVID supply chain rebuild has stabilised. Working capital credit lines are renewing rather than expanding. The implication is that aggregate corporate credit growth looks softer than capex-only growth, but the composition is improving on credit quality.

The MSME segment is recovering its share. The medium and small enterprise borrowers, who took the credit-quality hit through the COVID years, have re-engaged with the formal banking system through 2025 and into 2026. The bank-side digital onboarding improvements and the credit-decisioning algorithms tuned through 2024 are bringing more MSMEs into the formal book at acceptable risk levels.

Three things on the policy and structural side:

The Reserve Bank of India has held the repo rate steady through the first half of 2026 with a clear bias toward stability. The transmission to lending rates has been clean. Corporate borrowers are pricing off a known rate environment and treasury teams are forecasting against it.

The bond market has absorbed more of the large-corporate financing. The largest Indian corporates that have direct access to the bond market are increasingly funding through bonds rather than bank credit. The banks are seeing some good-quality demand migrate to the bond markets, which is part of the moderation in corporate credit growth at the top end.

The bank-side credit quality is the strongest it has been for a decade. The gross non-performing asset ratios at the major scheduled commercial banks are at historical lows. The write-back from previous provisioning is supporting profitability. The 2026 banks are well-capitalised, well-provisioned, and lending into a structurally healthy demand environment.

What is worth watching through FY27:

The mid-corporate (Rs 250 crore to Rs 2,500 crore turnover) segment, where the bank credit demand is growing faster than the overall book but where credit quality is more variable. The banks that have refined their mid-corporate credit assessment over the last cycle are taking share at acceptable risk. The banks that have not are either declining the business or taking it at risk.

The non-banking finance company (NBFC) refinancing demand. The NBFCs have absorbed a meaningful share of corporate credit growth indirectly, and the bank-side NBFC exposure is a focus of supervisory attention through 2026.

The currency posture and the impact on import-dependent corporates. The rupee has been stable through the first half of 2026 but the import-side cost pressure for some sectors remains a watching point.

The summary for corporate treasurers in May 2026: credit availability is healthy, pricing is stable, and the lending posture is selective on quality. The corporate borrowers with clean balance sheets and clear use-of-funds cases are getting good terms. The borrowers with weaker positions are working harder for facilities than they were a year ago.