Mumbai, July 28 -- India is entering its strongest phase of credit growth since 2012 as corporate loan demand surged to a 13-year high in May.

Corporate credit growth accelerated to 18.3 per cent year-on-year in May, marking the fastest pace seen since 2012. The rise reflects firms stepping up borrowing to support operations and capacity expansion amid brighter economic momentum.

Companies have increased borrowing for working capital, investment and business expansion, fuelling a broad-based expansion in bank credit. Banks are reporting stronger demand from corporate borrowers as activity gains momentum and inventories and capital expenditure requirements rise. The trend signals a revival in the credit cycle after an extended period of subdued corporate borrowing.

Scheduled commercial banks recorded credit growth of 15.9 per cent in FY 2025-26, underscoring widespread lending strength across the system. Industrial credit growth accelerated to 15 per cent during the fiscal year, compared with 8.2 per cent a year earlier, with lending to micro, small and medium enterprises a notable contributor. Improved liquidity conditions have further supported the expansion of loans to industry and commerce.

The current shift marks a significant change from the prolonged weakness that followed balance-sheet stress in the banking and corporate sectors, and suggests a more broad-based recovery in credit growth. The sustainability of the cycle will depend on whether rising borrowing is channelled into productive investment rather than predominantly short-term working capital needs. Regulators, lenders and corporates will therefore watch capital allocation, investment outcomes and asset quality closely.

Analysts expect that sustained credit growth can support investment, employment and capacity creation if funds are deployed towards long-term projects. However, a rapid expansion of lending will require careful risk management to prevent a rebound in non-performing assets and to ensure adequate capital buffers. Continued coordination between monetary and fiscal authorities and prudent bank lending norms will be important to maintain momentum.

Published by HT Digital Content Services with permission from Construction World.