Corporate Loan Demand Drives Bank Credit Growth Show Q1FY27 Earnings
Higher bond yields and rising working capital needs drive a revival in corporate borrowing
Mumbai: After several years of lull, corporate loan demand has emerged as the primary driver of bank credit growth, supported by higher working capital requirements and a shift from bond market borrowings to bank loans showed the April-June 2026-2027 earnings across banks.
Ashok Chandra, MD and CEO of Punjab National Bank, told DC, “Elevated bond yields have made market borrowings less attractive compared to bank loans. Earlier our corporate loan book was growing at 5-7 per cent, but now it is growing at 10 per cent.”
“All diversified sectors are coming to us be it renewable energy, infrastructure, roads are there, infrastructure power, agriculture trading, warehouse, real estate, natural engineering; all major sectors are there,” added Chandra.
HDFC Bank Ltd., India's largest private lender by assets, reported a nearly 19 per cent rise in corporate loans in the quarter, compared with a 1.7 per cent growth a year earlier. ICICI Bank Ltd.'s domestic corporate loans rose 18.5 per cent from a year earlier, while Kotak Mahindra Bank Ltd. posted a 15 per cent increase. Similarly, Federal Bank’s advances grew by a healthy 15 per cent YoY and 5 per cent QoQ to Rs 2.77 lakh crore, driven by robust growth in SME (17% YoY/4% QoQ), gold (33% YoY/ 8% QoQ) and corporate loans (14% YoY/4% QoQ). On the other hand, its retail book grew by just 1.9 per cent YoY (flat QoQ), with home loans declining by 2 per cent QoQ.
Sandeep Batra, executive director at ICICI Bank during Q1FY27 earnings, told reporters, “We are seeing loan growth across segments, but in particular we are seeing a sequential pickup in corporate loans.
During the current quarter, there was more demand from corporates on account of working capital and also we have seen a moderation in the bond and equity markets, which is an opportunity for us to capitalise.”
“The loan growth is reflective of economic activity,” added Batra.
According to Equirus Securities report, banks are entering the second quarter of FY27 with strong capital buffers, healthy asset quality and deposit costs nearing their bottom, shifting the focus to whether the ongoing recovery in corporate borrowing will translate into a sustained credit cycle. According to Equirus, the key variables to watch are the pace of NIM recovery in the second half of FY27, the durability of retail and unsecured loan growth, and whether corporate capital expenditure accelerates sufficiently to sustain the current momentum in lending.
