The Reserve Bank of India (RBI) is signaling optimism about credit growth, according to its latest Bank Lending Survey (BLS) for the second quarter of 2025-26. The survey reveals increasing loan demand across key industries, including manufacturing, agriculture, infrastructure, and services — a promising sign for economic expansion but also one that calls for prudent lending practices to maintain financial stability.
Manufacturing Loan Demand Strengthens, But Banks Remain Cautious
Manufacturing companies reported a noticeable uptick in loan demand, rising to 37.5% net positive response in Q2 FY26, slightly higher than in the previous quarters. The survey notes that textiles and food processing sectors are among the leading contributors to this growth. However, commercial banks are approaching new lending with caution, balancing the need to support expansion with the imperative to safeguard asset quality and avoid a rise in non-performing assets (NPAs).
Bankers’ Overall Optimism on Loan Growth
The BLS shows a positive net response of 38.9% in overall loan demand during Q2 FY26, with expectations rising to 42.6% in Q3 FY26 and maintaining above 44% through Q4 FY26 and into Q1 FY27 — signaling continued credit appetite across the economy. Agriculture and infrastructure sectors are also expected to be key drivers, with projected net demand responses near or above 44% in future quarters.
Lending Terms and Conditions: Stability with Signs of Easing
Most banks indicated stable lending conditions during Q2 FY26, with a slight easing in loan terms signaled by a positive net 9.3% response. This trend is expected to continue, with forecasted easing reaching 18.5% in Q3 FY26 and over 24% by Q1 FY27, benefiting sectors such as agriculture, manufacturing, services, and retail.
RBI’s Message: Growth Must Be Sustainable
RBI Governor Shaktikanta Das has emphasized the importance of responsible lending practices. While the central bank supports credit growth as vital for economic momentum, it stresses thorough due diligence and risk assessment to prevent a resurgence of bad loans and ensure sectoral stability.
Implications for the Manufacturing Sector and Broader Economy
The rising loan demand signals robust manufacturing activity but also presents challenges. Stricter credit appraisal might affect some smaller or riskier businesses’ access to funds. Nonetheless, increased lending discipline aims to sustain long-term financial health and economic growth.
Additional detailed data and expert commentary from RBI and industry analysts are expected in upcoming reports, providing further insights into credit trends and economic prospects.
