FICCI-IBA survey: Banks see constructive credit growth ahead; AI, cybersecurity, green finance top strategic shifts

New Delhi [India], April 19 : India's banking sector maintains a "broadly constructive outlook" on credit growth over the near term, backed by improved asset quality, stronger capital buffers, robust retail and SME lending, and early signs of a revival in private capex, according to a survey

The 21st round of the FICCI (Federation of Indian Chambers of Commerce and Industry)-IBA Bankers' Survey conducted during January-February 2026 captures sentiment for the outlook period January to June 2026 and includes 24 banks across public, private, foreign, small finance, and cooperative segments.

The findings of the survey suggest banks expect the current monetary policy stance to remain broadly stable in the coming months, viewing the policy framework as appropriately calibrated to balance growth and inflation considerations. Non-food credit momentum is expected to continue.

"Public Sector Banks appear particularly confident in the outlook, reflecting improved asset quality, stronger capital positions, and increasing traction in corporate lending," the survey findings said. Private banks are taking a balanced and selective approach, while foreign banks show moderate optimism consistent with their focused exposure to corporate and institutional segments."

Sectorally, services and retail are set to remain the main engines of lending. The services outlook reflects strong expectations of expansion, supported by activity in real estate, financial services, logistics, and tourism-related industries. Retail lending is also projected to stay robust, reinforcing its role as a central pillar of banking sector growth. SME credit demand is expected to be "particularly strong," driven by improving activity among smaller enterprises, greater formalization, and policy support for MSMEs.

Industrial credit growth, however, is likely to expand at a more measured pace, pointing to gradual recovery. Term loan demand is seen led by infrastructure, real estate, auto and auto components, pharmaceuticals, and emerging sectors such as data centres and defence-related industries. Working capital demand tracks trade and operational cycles, with textiles, automobiles, pharmaceuticals, engineering goods, and food processing leading on the industrial side, while wholesale and retail trade, transport operators, tourism, and hospitality drive services working capital needs.

The survey flags structural shifts reshaping banking. Artificial Intelligence is perceived as the most disruptive development likely to reshape banking operations, especially in credit underwriting, risk assessment, and collections. Competition and collaboration with fintech and big tech platforms are also "significant forces influencing the future banking business model."

Strategically, banks are prioritising climate risk management and financial inclusion for the coming year, alongside traditional goals like credit growth, asset quality, and digital transformation. The findings "underscore the growing prominence of sustainable finance opportunities, with renewable energy financing emerging as the segment perceived to have the strongest growth potential."

On risks, cybersecurity risk is cited as the most pressing challenge confronting banks today," reflecting rapid digitalization and the need for stronger tech resilience.

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