Loan demand across major sectors witnessed a seasonal moderation in the first quarter of FY26; however, bankers expect a recovery in the upcoming quarters, according to the Reserve Bank of India’s latest Bank Lending Survey (BLS).
The quarterly survey, conducted among senior loan officers of major scheduled commercial banks, assessed credit conditions during Q1 of 2025-26 and collected expectations for Q2 to Q4 of the fiscal year.
The latest survey covered 30 major scheduled commercial banks, accounting for over 90 per cent of total bank credit in the country.
Most of the bankers reported a softening in loan demand across key sectors during the April-June period. The net response for overall loan demand in Q1 stood at 37.5 per cent, down from 42.6 per cent in the previous quarter. Sectors such as agriculture, infrastructure, retail/personal loans saw a notable decline in sentiment.
Loan demand in the agriculture sector dropped to 30 per cent in Q1 FY26 from 41.7 per cent in Q4 FY25, while the infrastructure sector saw a sharp dip from 36.7 per cent to 22.4 per cent. Retail/personal loan demand moderated significantly to 27.8 per cent from 52 per cent in the previous quarter.
However, despite the moderation, bankers remain optimistic about loan demand in the current and upcoming quarters. For Q2 FY26, net response is expected to rise to 41.1 per cent, with notable gains expected in manufacturing (43.1 per cent), retail/personal loans (42.6 per cent), and agriculture (36.7 per cent).
For Q3 and Q4 of FY26, net response for overall loan demand is projected to climb further to 41.1 per cent and 48.1 per cent, respectively.
On the lending front, the terms and conditions of loans largely remained accommodative during Q1, with a net response of 12.5 per cent. Bankers noted continued ease in credit availability, particularly for retail/personal loans (22.9 per cent), services (16.1 per cent), and manufacturing (17.9 per cent).
Bankers now expect further easing of credit conditions in Q2, especially in services (23.2 per cent) and manufacturing (21.4 per cent).
Loan demand to grow
In the manufacturing sector, optimism about loan demand is expected to grow from 36.2 per cent in Q1 to 43.3 per cent in Q3 and Q4. In services, while current demand moderated, future expectations are strong at 42.9 per cent in Q4.
Despite a sharp drop in Retail and Personal loans during Q1, banks expect a strong rebound by Q2, with sustained momentum in the second half of the year.
The RBI noted that the survey findings represent the views of the participating banks and may not reflect the central bank’s official stance.
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