Indian banks lent Rs 1.8 lakh crore to NBFCs in the first half of fiscal 2027, exceeding the Rs 1.4 lakh crore directed toward residential mortgages. This trend shows a pivot toward wholesale lending as banks manage risks and seek growth. The move offers a liquidity boost to non-banking lenders but prompts investors to watch for concentration risks in bank portfolios.
The first half of the 2027 fiscal year saw a notable change in how Indian banks distribute credit. Data for the period ending September 2026 shows that banks provided Rs 1.8 lakh crore in fresh advances to non-banking financial companies (NBFCs), surpassing the Rs 1.4 lakh crore given as home loans. This shift suggests that banks are currently finding more growth potential or strategic advantage in lending to financial intermediaries rather than directly to retail homebuyers.
Overall, total non-food credit—which excludes loans for food procurement—reached Rs 229 lakh crore by the end of September 2026, marking a 19.1% increase compared to the previous year. The services sector was a primary driver of this growth, receiving Rs 4.9 lakh crore in new credit. Within this category, lending to NBFCs saw a significant rise of 41.8%, pushing total outstanding credit to these entities to Rs 22.5 lakh crore.
While banks have increased wholesale lending, they are also tightening their retail strategy to manage risk. A clear trend is the preference for secured lending. Advances against gold jewellery surged by 82.6%, adding Rs 1.2 lakh crore, while loans backed by fixed deposits grew by 53.3%. By focusing on these highly liquid assets, banks aim to protect their balance sheets against potential defaults, even as they grow their loan books.
For investors, this trend has two sides. On one hand, the increased flow of funds is a positive sign for NBFCs, as it ensures they have the liquidity to continue their own lending operations. Historically, liquidity availability is a critical performance driver for these companies. On the other hand, the Reserve Bank of India (RBI) has previously expressed caution regarding the interconnectedness between banks and NBFCs. High concentration of bank loans to NBFCs creates a systemic risk; if a major NBFC faces asset quality issues, it can negatively impact the lending banks.
Industrial credit growth remained steady at 19.5%, with a total of Rs 49.8 lakh crore outstanding. While large industries attracted the majority of new credit, micro, small, and medium enterprises (MSMEs) also showed strong demand, adding Rs 1.6 lakh crore to their credit books. As this financial year progresses, the key monitorable for shareholders will be the asset quality of both the banks and the NBFCs receiving these funds. Investors should track whether the RBI implements stricter norms on bank-NBFC exposure or risk weights, and monitor how credit demand shifts across retail and wholesale sectors in upcoming quarterly results.