Can Banks Meet FY26 Loan Demand? Fresh Bank Credit Growth Forecast Explains The Trend

The banking system received a clear signal after CareEdge Ratings released its Banking Report for FY26 on 27 November 2025. 

A common question rises now. Can India’s lending cycle gain speed when deposits stay slow and loan demand stays high. The report from the CareEdge Ratings placed the bank credit growth forecast for the next financial year at 11.5 to 12.5 percent. The estimate was based on real numbers published by the Reserve Bank of India and the Ministry of Finance through the second half of the year 2025.

The latest RBI records showed that total bank credit grew 11 percent year on year in March 2025 under its Quarterly Statistics on Deposits and Credit. This created the base for the projected FY26 range and helped banks understand the demand pattern for the coming year.

Loan–Deposit Gap to Shape Lending Strategies in Early FY26

According to a recent report, as of 31 October 2025, deposits grew by 9.7% year-on-year, per RBI data.This gap between loan growth and deposit growth shaped the entire forecast.

 The slow deposit expansion pushed banks to plan more wholesale funding in quarters ahead. Many lenders flagged this point during their third quarter reviews.

The table below helps explain the underlying picture before moving to the next part. These numbers show why banks expect a tighter funding cycle in the first half of the year 2026.

The difference between loans and deposits will shape balance sheet plans for most lenders.

Wholesale Funding to Support Balance Sheet Requirements

With the funding gap likely to continue in the early part of FY26, wholesale funding is expected to become an essential tool for banks. Lenders may turn to instruments such as infrastructure bonds, certificates of deposit and longer-tenor market borrowings to manage their liquidity. 

This shift could also bring more discipline in how banks plan their cost of funds. Market analysts note that wholesale funding can provide quick access to large sums, but it also requires careful timing because borrowing costs change with market conditions. As a result, treasury teams may play a bigger role in planning borrowing programmes for the year ahead.

Government Sector Numbers That Support The FY26 Forecast

These sectors formed steady demand pools in year 2025. 

Their behaviour created the foundation for the FY26 bank credit growth forecast.

In November 2025, Loansjagat mentioned that public sector banks aimed to cross one lakh crore rupees in digital footprint based loans by FY26. 

That story explained the rise of automated scoring. It also explained why personal and small business loans grew fast in late year 2025. The trend now links directly to the CareEdge FY26 report. Digital routes have raised loan demand and shaped the broader forecast.

Conclusion

The bank credit growth forecast of 11.5 to 12.5 percent for FY26 reflects steady loan demand in housing, MSME and agriculture segments. 

RBI and Finance Ministry data showed the gaps that lenders must prepare for in early 2026. The next quarters will reveal how banks balance credit flow with limited deposits and rising digital loan exposure.
 

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