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India’s Private Capex Recovery Has Yet To Boost Credit Growth
Indian companies are planning to spend more money on new projects.
Banks also approved more loans for these projects in FY26.
However, this increase has not yet created a strong overall lending boom.
Infrastructure projects received about half of the project-loan approvals.
Power projects were an important part of that funding.
Loans for roads and bridges fell sharply in FY26.
The Reserve Bank of India expects private-sector investment to rise further in FY27.
Kotak Institutional Equities remains cautious because the improvement is not yet large enough to change the broader credit-growth trend.
Fresh private-sector project loan sanctions rose 18% year-on-year in FY26, according to Kotak Institutional Equities.
Private corporate capital expenditure is projected to increase to Rs 3.2 trillion in FY27 from Rs 2.6 trillion in FY26.
Project loan sanctions remained around 3% of total loans in FY26, while pending disbursements were about 2%.
Infrastructure accounted for roughly half of project sanctions, with power projects receiving much of the funding.
Kotak said the recovery in project sanctions remains insufficient to significantly change India’s overall credit-growth trajectory.
- Who
- India’s private-sector companies, banks and financial institutions, the Reserve Bank of India, and Kotak Institutional Equities.
- What
- Private-sector project loan sanctions increased, but the recovery has not yet produced a strong private-capex-led credit cycle.
- Where
- India, with Maharashtra and Gujarat receiving the largest shares of private-sector project sanctions.
- When
- The data covers FY26 and projections for FY27; the report was published on September 30, 2026.
- Why
- Project lending has improved but remains concentrated in infrastructure, especially power, and is not yet large enough to materially lift overall credit growth.
RBI’s More Positive Projection
Kotak’s Cautious Assessment
Private investment outlook
RBI’s More Positive Projection
The Reserve Bank of India projected private corporate capital expenditure to rise to Rs 3.2 trillion in FY27 from Rs 2.6 trillion in FY26.
Kotak’s Cautious Assessment
Kotak Institutional Equities said the improvement in project sanctions has not yet translated into a strong private-capex-led credit cycle.
Effect on credit growth
RBI’s More Positive Projection
The rise in project sanctions and the recovery in corporate lending indicate improving investment and credit conditions.
Kotak’s Cautious Assessment
Kotak said the recovery remains insufficient to materially alter the overall credit-growth trajectory and that downside risks remain.
Sectoral funding
RBI’s More Positive Projection
Infrastructure continues to attract substantial bank funding, supporting ongoing investment in major projects.
Kotak’s Cautious Assessment
Kotak noted that funding remains concentrated, mainly in power, while roads and bridges sanctions declined sharply and mega-project sanctions remain below historical levels.
Key facts
- FY26 project-loan growth
- Fresh private-sector project loan sanctions rose 18% year-on-year.
- FY27 private capex projection
- Rs 3.2 trillion, compared with Rs 2.6 trillion in FY26.
- Share of total loans
- Fresh project loan sanctions were around 3% of total loans in FY26.
- Pending disbursements
- Pending project-loan disbursements accounted for around 2%.
- Infrastructure share
- Infrastructure represented around 50% of total project sanctions in FY26.
- Overall credit growth
- Overall credit growth was around 18% year-on-year, supported by a recovery in corporate lending.
- Largest recipient regions
- Maharashtra and Gujarat received the largest shares of private-sector project sanctions.
Quotes
Kotak Institutional Equities
Brokerage and research firm that analyzed India’s project sanctions and credit growth
“Credit growth, driven by an exciting phase of private capex, is yet to be seen. Infrastructure (mainly power) remains a preferred destination for bank funding.”
thehindubusinessline.com
“Our analysis suggests that the improvement remains insufficient to materially alter the overall growth trajectory at this stage.”
thehindubusinessline.com
Sources
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