Industry Odisha Bureau, May 13: Even though the credit recovery momentum by the Indian banks reportedly augured well and good at its nascent stage, the dilly-dallying and procrastination of a tangible solution to the tug of war between the sworn enemies (US and Israel on one side and Iran on the other side) is reportedly telling against the credit recovery pace of the Indian financial institutions.
Media reports said, “India’s banking sector had earlier shown optimistic signs of recovery as the bank credit grew by more than 14% year-on-year between December 2025 and February 2026 (prior to the Middle East tension that broke out in the wee hours of February 28).”
Moreover, the RBI reportedly augmented further “its support by allowing banks to extend collateral-free loans of up to ₹20 lakh to MSMEs.”
Media reports also said, “Lending to non-bank financial companies (NBFCs) accounted for 11-13% of incremental bank credit growth during January and February 2026 claimed to be the highest in 33 months. In addition, gold loans contributed around 10% of bank credit growth recently.”
While vehicle loans reportedly accounted for nearly 4% of incremental credit growth, housing loans, on the contrary, saw credit decline to around 12% down from 15% a year earlier.”
Media reports quoting expert opinions further said, “Despite the GoI’s ‘Emergency Credit Line Guarantee Scheme’ (ECLGS) 5.0, offering a 100% government guarantee on MSME credit and capped at 20% of peak working capital utilization in a bid to ease liquidity stress as well as limit future bad loans, the ECLGS 5.0 is unable to fully compensate for higher production and transport costs caused by supply chain disruptions, expensive insurance, and rising fuel prices.”
Apart from the aforesaid contentions, the media reports also highlights on “depreciation of rupee is harming manufacturing MSMEs solely relying on imports of crude oil, machinery, electronics and chemicals. Moreover, inflation also comes as a stumbling block for retail lending.”
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