Boats anchored near the Lotus JettyWorli (Fishermens Wharf) with the Mumbai skyline in the background, in the Worli-Tardeo area of Mumbai, India, on Sunday, October 12, 2025. Photographer: Abeer Khan/Bloomberg Photo by Abeer Khan /Bloomberg

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(Bloomberg) — India’s top private banks are betting on a sustained pick up in lending after reporting healthy numbers in the first quarter of the fiscal year, as more companies shift away from pricier bond market borrowings to cheaper loans.

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At least six private banks reported robust loan growth in the three months to June, driven by corporate lending, as high bond yields make market funding less attractive. 

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HDFC Bank Ltd., India’s largest private lender by assets, reported a nearly 19% jump in corporate loans in the quarter, compared with a 1.7% growth a year earlier. ICICI Bank Ltd.’s domestic corporate loans rose 18.5% from a year earlier, while Kotak Mahindra Bank Ltd. posted a 15% increase. 

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Corporate loan demand was driven by working capital needs, while moderation in borrowing from bond and equity markets also created lending opportunities for banks, ICICI’s Executive Director Sandeep Batra said in the lender’s earnings call Saturday.

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“It will be a secular loan growth across sectors in the next two quarters,” said Yes Bank Ltd. Chief Executive Officer Vinay Tonse. The bank, which has largely been focusing on the retail segment, saw its corporate and institutional loan book expand more than 41%. 

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The pickup comes as overall bank credit growth accelerated to a two-year high of 18.6% year-on-year in the two weeks to June 30, according to Reserve Bank of India data, underscoring the resilience of loan demand even as deposit mobilization lagged. 

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But an expected surge in foreign currency deposits, which according to some analysts could top $50 billion by end-September, may improve banking system liquidity, giving lenders access to a larger pool of relatively low-cost foreign-currency funding. As part of its efforts to boost reserves, India’s central bank in June offered full hedging-cost support for banks raising three- to five-year foreign currency deposits — and has allowed borrowing against such funds.

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Sovereign 10-year bond yields climbed above 7% after the US-Iran war which roiled Indian markets. While the yields have eased from those highs, rising oil prices due to fresh tensions in the Middle East keep investors on the edge about further monetary tightening. Elevated benchmark yields have lifted corporate borrowing costs, dampening their appetite for debt.

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HDFC Bank’s Deputy Managing Director, Kaizad Bharucha said corporate demand was evenly split between term loans and working-capital financing during the quarter, with electronics, automobiles, renewable energy and commodities showing the strongest demand. Yes Bank, meanwhile, saw healthy borrowing from oil and metals companies.

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Axis Bank Ltd. expects its loan growth to outpace the industry by about 300 basis points over the medium term, Chief Financial Officer Puneet Sharma said.

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Banks are also being backed by healthy balance sheets. Following years of cleaning up of bad loans, strengthening underwriting standards and building capital buffers, lenders are more willing to finance corporate borrowers that meet stricter risk criteria. 

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The banking sector’s gross non-performing asset ratio is near multi-year lows, giving lenders confidence to grow their corporate books without repeating the excesses that led to the bad-loan cycle of the last decade.

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—With assistance from Harshita Swaminathan.

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