Early loan disbursement recovery points to healthier credit growth in India in FY27

New Delhi, Dec 23 Early signs of recovery in loan disbursements across most retail and vehicle segments point to a healthier growth in credit cycle in India in FY27, a report said on Tuesday.

The report from JM Financial Institutional Securities said that disbursement momentum across sub-segments rose 6 per cent and 35 per cent year‑on‑year in H1 FY26 and Q2 FY26, respectively, versus a growth of 3 per cent and 11 per cent YoY in FY25.

Public sector banks gained share in personal, home and auto loans while private banks strengthened share in consumer durables, credit cards and two‑wheelers, the report said. Personal loan disbursements grew about 23 per cent and 35 per cent YoY in H1 FY26 and Q2 FY26, respectively, with PSBs’ disbursements up 77 per cent and their market share by value rising to 36 per cent in Q2FY26.

Banks focused on larger ticket sizes, with PSBs’ average disbursement ticket size increasing by 29 per cent YoY to Rs 7,17,000 in Q2 FY26, said the report.

Asset quality improved, with overall "Portfolio at Risk" (PAR) 31-90 declining to 1.6 per cent in Q2 FY26, the report noted.

Home‑loan disbursements grew about 11 per cent and 14 per cent YoY in in H1FY26 and Q2FY26 respectively, with PSBs capturing 50 per cent of origination value in the quarter. Higher‑ticket loans above Rs 7.5 million accounted for nearly 40 per cent of value, the report noted.

Meanwhile, Union Minister of Commerce and Industry Piyush Goyal said that public sector banks have emerged as strong, competitive institutions standing shoulder to shoulder with private and foreign banks in supporting India’s growth.

He pointed out that banks recorded profits of around Rs 3 lakh crore last year, demonstrating their capacity to lend to honest borrowers. Goyal urged banks to lend liberally and responsibly, speed up and increase transparency of loan approvals and provide capital and guidance to MSMEs helping them leverage government schemes.

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