The credit engine of India’s banking sector has visibly shifted gears. In the first half of FY27, banks pumped Rs 1.8 lakh crore into non-banking financial companies (NBFCs), eclipsing the Rs 1.4 lakh crore directed toward home loans. This is not a marginal change; it is a fundamental reordering of priorities, with institutional borrowing now outpacing the traditional retail housing segment for the first time in this cycle.
The broader picture shows robust appetite across the corporate and services segments. Scheduled commercial banks added Rs 16.1 lakh crore in incremental non-food credit between March 31 and September 30. Services led the charge, absorbing Rs 4.9 lakh crore, followed by personal loans at Rs 4.5 lakh crore. Industry and trade accounted for Rs 3.7 lakh crore and Rs 1 lakh crore, respectively. This distribution signals that demand is no longer concentrated in a single vertical but is spreading across the corporate and service economy.
Underneath the services umbrella, the surge in NBFC lending is particularly striking. Advances to these entities grew 41.8% year-on-year to reach Rs 22.5 lakh crore. Commercial real estate and trade credit also posted strong double-digit growth, rising 23.3% and 23.9% respectively. Meanwhile, industrial credit expanded 19.5%, with medium enterprises seeing a 33.2% jump in lending, indicating that smaller and mid-sized businesses are increasingly turning to bank credit for expansion.
Retail lending is not stagnant, but its composition is evolving. Gold loans remain a powerhouse, with outstanding advances surging 82.6% year-on-year to Rs 5.8 lakh crore. Banks added another Rs 1.2 lakh crore in such loans in just six months. Similarly, loans against fixed deposits, including FCNR(B) and NRNR deposits, jumped 53.3% to Rs 2.2 lakh crore. These secured retail products are absorbing a significant portion of personal loan growth, which rose 17.3% to Rs 74.27 lakh crore overall.
The shift toward NBFCs and secured retail products suggests banks are balancing growth with risk management. Relying less on unsecured personal loans and more on institutional counterparties and collateralized retail advances reduces exposure to consumer default risks. As the second half of FY27 approaches, the sustainability of this credit flow will depend on NBFC asset quality and continued corporate demand. The Reserve Bank of India is likely to monitor this composition closely, given the systemic importance of NBFCs in the credit chain.