Scheduled Commercial Banks Regain Market Share in Commercial Sector Financing
In a significant turnaround, scheduled commercial banks have successfully regained their market share in financing the commercial sector during the fiscal year 2026 up to January 31. This recovery comes after a contraction observed in FY25, which was driven by a surge in equity issuances and non-bank funding sources. The resurgence is attributed to banks expanding non-food credit at a faster rate than the overall resource pool, marking a positive shift in the financial landscape.
RBI Bulletin Data Highlights Robust Growth in Bank Credit
Data released in the Reserve Bank of India's bulletin for FY26 up to January 31, 2026, reveals that incremental flows through bank credit reached an impressive Rs 21.8 lakh crore in the ten-month period. This represents a substantial increase from Rs 14 lakh crore recorded in the same period of 2024-25, translating to a growth rate of 55.3%. Over the same span, the total flow of financial resources from all sources rose from Rs 25.5 lakh crore to Rs 34.5 lakh crore, indicating a 35% increase.
Because bank credit grew more rapidly than the overall resource pool, banks managed to lift their share of total commercial sector funding to 63.2% during this period. This achievement underscores the renewed vigor in the banking sector's lending activities, which had faced challenges in the previous fiscal year.
Contraction in Domestic Non-Bank Funding Sources
In contrast to the banking sector's growth, domestic non-bank sources of funding experienced a slowdown in FY26 up to January 31. Overall domestic non-bank funding grew by a modest 4.9%, increasing from Rs 9.1 lakh crore in the comparable period of FY25 to Rs 9.6 lakh crore. Notably, equity issuances contracted by 12.3%, declining from Rs 3.4 lakh crore to nearly Rs three lakh crore for the period ended January 31.
Corporate bond issuances emerged as the only major domestic non-bank segment to outpace bank credit growth, rising significantly from Rs 1.1 lakh crore to Rs 2.5 lakh crore. This highlights a shift in funding preferences within the non-banking sector, with corporate bonds gaining traction amid broader declines.
Foreign Funding Remains Firm and Supports Recovery
Foreign sources of funding remained robust during this period, with resource flows from abroad increasing from Rs 2.4 lakh crore to Rs 3.1 lakh crore up to January 31. This steady inflow from international markets has played a crucial role in supporting the overall recovery in commercial sector financing.
The recovery follows a year of retreat, as non-food bank credit had fallen from Rs 21.4 lakh crore in 2023-24 to Rs 17.9 lakh crore by the end of 2024-25. In the current fiscal year, most banks have responded by increasing their advances targets, driven by bank credit growth of 14.6% for the fortnight ended January 31, 2026—the highest rate in 19 months.
This resurgence in bank credit and the subsequent regain of market share signal a strengthening of the banking sector's role in fueling economic growth, while also reflecting changing dynamics in the broader financial ecosystem.
