India’s commercial credit sector is gathering pace, with total lending climbing 15% year-on-year to ₹298 lakh crore (around US$3.3 trillion) by December 2025, according to the Reserve Bank of India (RBI). This growth highlights stronger business demand for finance and a notable shift in how companies are accessing funds.
Banks remain the primary source of lending, yet non-bank financial companies (NBFCs) and corporate bonds are increasingly shaping the landscape. For businesses and investors, this shift signals a more flexible and resilient financing environment.
Banks Continue to Lead
Scheduled commercial banks still account for the majority of commercial credit, with loans totaling ₹202.3 lakh crore. Bank lending grew roughly 14.4% year-on-year, reflecting robust demand from infrastructure, manufacturing, and corporate expansion projects.
Yet banks aren’t the only game in town. NBFCs are rapidly gaining ground. Lending from NBFCs jumped 22% year-on-year, now representing nearly half of all commercial credit flows. Their growth underscores how businesses, especially SMEs, are increasingly relying on alternative finance providers for quick, tailored solutions.
Corporate bonds also play a growing role. Companies raised ₹22.9 lakh crore through bond issues, a sign that firms are seeking longer-term funding beyond traditional loans. Bonds are particularly attractive for financing strategic projects and large capital expenditures.
Commercial Paper Slows as Rates Rise
While overall lending is strong, commercial paper (CP) issuance dipped slightly to ₹1.56 lakh crore, down 1.2% from the previous year. Analysts attribute this to rising government bond yields, which made short-term bank loans more appealing than CPs for managing liquidity.
This shows how sensitive corporate funding choices are to interest rate changes. Firms balance cost, flexibility, and timing when deciding between CPs, bank loans, and bonds—a dynamic that reflects a maturing financial market.
Who Benefits Most?
SMEs stand out as primary beneficiaries of this credit expansion. Banks often hesitate to offer smaller loans or higher-risk financing, but NBFCs are filling the gap. Flexible financing options allow SMEs to invest, hire, and innovate, supporting regional growth and broader economic activity.
Large corporates benefit too. Access to a diversified mix of lenders—banks, NBFCs, and capital markets—means that companies can structure funding in ways that align with both short-term operational needs and long-term strategic goals.
Economic Implications
The 15% rise in commercial credit points to a healthy business environment. More lending suggests companies are confident enough to invest, expand, and plan ahead. At the same time, a diversified funding mix reduces reliance on any single channel, adding stability to India’s financial system.
Rising NBFC participation also signals that private credit markets are becoming more mature. Businesses now have options beyond banks, making it easier to secure funding for specialised or non-traditional projects.
Risks to Watch
Rapid credit growth brings risks. Asset quality could come under pressure if companies struggle to repay loans, especially in higher interest rate environments. NBFCs, with their faster growth rates, must carefully manage exposure.
Regulators have a key role in balancing credit expansion with financial stability. Sustained monitoring ensures that strong growth doesn’t lead to vulnerabilities in the system.
A Look Beyond India
For UK investors and global businesses, India’s credit surge offers valuable insights. A growing and diversified lending ecosystem reflects a mature, flexible financial system capable of supporting corporate growth and investment.
International firms seeking partnerships or market entry can benefit from the availability of bank loans, NBFC financing, and corporate bonds. The range of options gives foreign investors and collaborators confidence that India can support both short-term operational needs and long-term strategic investments.
What This Means for 2026
India’s commercial credit market isn’t just expanding it’s evolving. Banks remain central, but NBFCs and alternative financing channels are increasingly important. While commercial paper issuance has slowed, higher NBFC lending and active bond markets make up the difference.
This trend shows adaptability: companies aren’t constrained by one source of funding, and lenders are responding to demand with varied offerings. For the economy, it points to stronger corporate investment and operational resilience, which could sustain growth into 2026 and beyond.
Key Takeaways
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Commercial credit rose 15% to ₹298 lakh crore by December 2025.
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Banks continue to lead, but NBFCs are the fastest-growing lenders.
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Corporate bonds are increasingly used for long-term financing.
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Commercial paper issuance has slowed due to higher government bond yields.
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SMEs benefit from flexible NBFC lending, supporting regional growth.
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Strong credit growth signals higher business confidence and investment readiness.
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Rapid expansion requires careful monitoring of asset quality and interest rate impacts.
India’s commercial credit growth reflects not just rising numbers but a shift toward a more flexible, diversified financial ecosystem. For businesses, investors, and policymakers, this is a clear sign of a resilient economy, capable of supporting corporate growth and strategic investment in the years ahead.
FAQs on India’s Commercial Credit Growth
1. What is the current level of India’s commercial credit?
As of December 2025, total commercial credit in India reached ₹298 lakh crore (approximately US$3.3 trillion), marking a 15% year-on-year increase, according to RBI data.
2. Which institutions are driving the growth?
Banks remain the largest providers, with ₹202.3 lakh crore in lending. NBFCs are the fastest-growing segment, increasing 22% year-on-year, while corporate bonds also contribute significantly.
3. Why has commercial paper issuance slowed?
Commercial paper (CP) issuance fell slightly to ₹1.56 lakh crore due to higher government bond yields, which made short-term bank loans a more attractive financing option for companies.
4. How does this credit growth affect SMEs?
SMEs benefit from NBFC lending, which often provides quicker, more flexible, and smaller-ticket loans that banks may not fully cover. This supports expansion, innovation, and regional economic growth.
5. What are the risks associated with rapid credit expansion?
Rapid lending growth can raise concerns about asset quality. Companies may face repayment challenges, especially with rising interest rates. Regulators and lenders must closely monitor exposure to maintain stability.
