Gross bank credit to industry in India surged by Rs 39,599.2 crore during the first two months of FY27, reaching Rs 46.2 lakh crore as of end-May 2026, with the power sector driving the bulk of incremental lending, according to data reported by Business-Today. The 17% annualized credit growth to industry has outpaced personal loan growth (15.4%) and matched overall credit expansion of 17.7%, though industry's share of total bank credit slipped to 22.8% from 23.4% a year earlier.
Sectoral Credit Allocation Shift
The lending pattern reveals a pronounced tilt toward the power sector, chemicals, and vehicles, while telecommunications experienced a significant contraction. The power subsector recorded the single largest increase, with outstanding credit rising by Rs 15,399.9 crore from Rs 8.4 lakh crore to Rs 8.6 lakh crore, a growth of 1.8% in just two months. In contrast, telecommunications credit declined by Rs 10,949.6 crore, indicating a major reallocation of bank exposure away from telecom.
Power Sector Leads the Charge
Suresh Ganapathy, analyst at Macquarie, noted in a recent report that private sector banks have been aggressively increasing exposure to the power sector. "Private sector banks have been quite aggressive here and note that they do not lend to state electricity boards. So these are all either the PSU power companies like NTPC, PowerGrid or private sector power projects...Axis in fact has seen doubling of their power sector exposure in the last 12 months," Ganapathy said. He attributed the trend to improved execution in transmission capacity and continued traction in renewable energy capacity addition, adding, "Right now demand is expected to be strong and secular driven by lot of factors (hot summers, data centres, electric cooking etc ) - whole host of factors and there isn't any issue of excess supply now."
Industry Growth Outpaces Personal Loans
For the first time in several years, bank credit to industry grew at 17%, surpassing personal loan growth of 15.4% and keeping pace with overall credit growth of 17.7%. However, the share of industry in total bank credit continued to decline, falling from 23.4% in May 2024 to 22.8% in May 2026, reflecting the faster expansion of retail and services lending over a longer horizon.
Infrastructure Credit Dynamics
The overall infrastructure sector recorded a net increase of Rs 14,481.6 crore, with credit rising from Rs 14.9 lakh crore to Rs 15 lakh crore, a growth of 1%. The increase in the power subsector alone exceeded the total infrastructure sector growth due to the sharp contraction in telecommunications. Other segments within infrastructure also contributed positively:
| Sub-sector | Change in credit (Rs crore) |
|---|---|
| Power | +15,399.9 |
| Other infrastructure | +5,790.3 |
| Roads | +1,851.3 |
| Airports | +20.7% (Apr–May 26) |
| Telecommunications | –10,949.6 |
Airports recorded a particularly strong 20.7% increase during April to May 2026. The data underscores a strategic pivot by banks toward sectors with robust demand fundamentals, even as telecom exposures are pared back.
Implications for Trade Finance Professionals
For finance executives and treasury directors, the shift in credit allocation signals where working capital and project finance demand will concentrate. The power sector's strong growth, especially in renewables and transmission, creates opportunities for structured trade finance and supply chain credit. The contraction in telecom may reduce exposure risk in that segment but also implies lower demand for equipment financing. The overall industrial credit expansion of 17% suggests improving corporate confidence and potential for higher import of capital goods, which could increase demand for letters of credit and trade credit instruments. Monitoring sector-specific credit trends will be essential for managing cross-border lending and hedging strategies.
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