MUMBAI: Large companies are returning to banks for funding as private-sector capital expenditure gathers pace and rising commercial paper (CP) rates make bank loans more attractive.
Bank credit outstanding to large corporates jumped 14.4% year-on-year to Rs 31.10 lakh crore as of May 31, 2026, according to the Reserve Bank of India’s latest sectoral deployment of credit data. A year earlier, growth in this segment was just 1.5%.
Bankers attributed the sharp turnaround to a combination of fresh investment plans across sectors such as power, steel, renewable energy, battery storage and data centres, along with a shift in borrowing away from the commercial paper market.
“Corporate credit has been growing as private capex demand is increasing with both greenfield and brownfield project expansions. This momentum is expected to accelerate this quarter. Demand is coming from sectors like iron and steel, power, data centres, battery storage and renewable energy,” said Ashwini Kumar Tewari, managing director, State Bank of India, in charge of corporate banking and subsidiaries.
“Large companies are coming to banks because commercial paper rates have risen over the past few months. We are also seeing strong demand from small and medium industries. The pickup is becoming more broad-based as companies increasingly source funding from banks,” said Ashok Chandra, managing director and chief executive officer of Punjab National Bank.
The shift is visible in money market borrowings as well. Outstanding commercial paper issuances by corporates fell to Rs 96,189 crore for the fortnight ended June 30 from Rs 1.59 lakh crore a fortnight earlier, reflecting a move towards bank financing.
Loan outstanding to industry — including large companies and MSMEs — rose 17.5% year-on-year to Rs 46.24 lakh crore as of May-end, compared with a growth of just 5.3% a year earlier. Large corporates account for nearly 67% of total industrial credit, making their return a key driver of the overall pickup.
Credit growth remained robust across the MSME segment as well, though that largely continued an existing trend. Loans to medium enterprises rose 21.2% year-on-year to Rs 4.47 lakh crore, while lending to micro and small enterprises increased 26.2% to Rs 10.67 lakh crore. A year earlier, these segments had already recorded growth of 16.9% and 13.7%, respectively.
Overall bank credit expanded 17.7% year-on-year to Rs 215.16 lakh crore as of May-end.
Among industries, power remained the largest contributor, with bank lending rising 23.8% to Rs 8.58 lakh crore. Loans to the iron and steel sector grew 22.6% to Rs 3.59 lakh crore, while credit to petroleum, coal products and nuclear fuels surged 40.9% to Rs 1.94 lakh crore.
Bankers said highly rated corporates are increasingly finding bank loans competitive, with lending rates available below 10% in many cases.
“Besides JSW Steel, Adani and Reliance, a few other major business houses are lining up funding plans that include a higher share of bank borrowings,” said a senior banker. “A gradual shift from commercial paper to bank credit is under way.”
Banks also expect MSMEs to remain an important growth engine through the rest of the year. “The RAM (retail, agriculture and MSME) segment has been a major contributor to our credit growth in the first quarter of FY27. We expect it to remain a key driver in the coming quarters as well,” said Kalyan Kumar, managing director and chief executive officer of Central Bank of India.
Source; The Financial Express
