The headline figure for Indian bank credit growth in the fortnight ended May 2, 2026 was steady — somewhere in the 12-13% year-on-year range, broadly in line with the trajectory through Q1. As is usually the case with RBI data, the headline doesn’t tell the interesting story. The sectoral breakdown does.

A closer read of where lending is and isn’t expanding in mid-2026.

Industrial credit: better, but unevenly

Industrial credit growth has picked up notably from the soft patch of late 2024 and early 2025. Year-on-year industrial credit was running close to 9% in the most recent RBI release, the strongest since mid-2024.

The expansion is concentrated. Infrastructure and core industries (steel, cement, power) are taking the largest share of incremental lending. The capacity expansion cycle that several major Indian industrial groups committed to in the 2024-2025 capex announcements is now drawing down credit at scale, and the bank balance sheets reflect that.

MSME credit has improved meaningfully too. The combination of CGTMSE expansion, the credit guarantee fund modifications announced in the 2025 budget, and improved bank willingness to lend into the segment have pushed MSME credit growth to the mid-teens. Within that, the priority sector classification and the linkage to GST and credit bureau data have improved underwriting confidence.

Services-sector industrial credit is more muted. The non-banking financial company segment, in particular, has seen tighter lending from public sector banks as the post-2023 regulatory tightening continues to filter through.

Retail credit: shifts in composition

Retail credit growth remains a meaningful driver of the overall headline but the composition is shifting in ways worth watching.

Home loan growth has cooled from the pace of 2022-2024 but remains in healthy mid-teens territory. The shift is more in deal size than in volume — the average new home loan ticket size has expanded faster than inflation, reflecting both genuine property price appreciation and a buyer mix tilting upward.

Vehicle finance has slowed materially, particularly in two-wheelers, reflecting weaker rural demand. Personal loans, after the regulatory tightening of 2024-2025, are running at sustainable rates rather than the runaway pace of 2022-2023. The RBI is broadly satisfied with where personal loan growth has landed.

Credit card spending growth has held up at the volume level but average outstanding balances have moderated, suggesting consumers are running cards harder but paying them down more aggressively. The card stress data the major issuers report supports this read.

Agricultural credit: structural reforms biting

Agricultural credit is the segment where the structural reforms of the last few years are starting to show in the numbers. The expansion of digital land record integration with credit bureau data has improved underwriting quality, and several large public sector banks have meaningfully grown their agricultural credit books in 2025-2026.

The interesting subtext is the deceleration in subsidised credit through the Kisan Credit Card scheme as more lending shifts to commercial-rate facilities with better-structured risk pricing. This is the direction the policy framework has been pushing, and it’s showing in the data.

Corporate credit: the conversation is shifting

Indian large-corporate credit demand has been a debated topic for years. The shift in 2026 is that several of the largest industrial groups are visibly back in the credit market for major projects — green steel commitments, refinery expansions, the cement capacity build-out, the data centre infrastructure programs that have accelerated through 2024-2026.

The terms are notable. The leading borrowers are securing pricing meaningfully below the broader corporate benchmark, reflecting the depth of competition for high-quality balance sheet exposure. The smaller corporates and the lower-rated names are paying meaningfully wider spreads than they were 18 months ago, reflecting a more discriminating credit market.

The bond market is increasingly the venue for the highest-quality corporate borrowing, with bank lending more concentrated in the mid-rated and project-finance segments where the bond market is less accessible.

What I’d watch through H2 2026

A few specific developments to follow over the next few months.

RBI policy stance. The April policy continued the measured easing trajectory and the May commentary suggested a similar bias. The next clear catalyst is the August/October policy meetings, where any meaningful surprise on the inflation trajectory would shift the rate outlook.

Banking system liquidity. Surplus has been comfortable through Q1 but the dynamics of large dividend payments, advance tax outflows, and the credit growth trajectory will test the system through the next quarter. The RBI’s variable-rate reverse repo operations have provided a calibrated response so far; the question is whether the operations need to shift toward sustained liquidity absorption or whether the natural drainage suffices.

Asset quality. The headline asset quality numbers remain benign. The leading indicators — slippage in the personal loan segment, stress in mid-tier NBFC exposures, isolated stress in specific sectors — are worth watching but not yet flashing red.

Foreign portfolio flows. The pace and composition of foreign bank credit flows into India have an indirect bearing on the local credit market through the financing of corporate working capital and project finance. The 2025 trajectory was positive; the 2026 trajectory has been more variable as global rate dynamics have shifted.

The Indian credit cycle in mid-2026 looks healthier than at any point since 2018-2019. The challenge for the regulator and the banking system is to maintain the discipline that’s enabled the current cycle without ceding ground to the asset quality risks that historically follow strong credit expansion. The data through H2 2026 will tell the story of whether that discipline is holding.