2 days ago
Rate Hikes Loom, Yet Credit Growth May Remain Strong
A study by the Reserve Bank of India found that credit and economic growth can help each other.
When businesses can borrow money, they can invest and help the economy grow.
When the economy grows, businesses may also want to borrow more.
The article says banks are the main source of funding for most corporations in India.
In 2025-26, non-food bank credit made up 62% of the resources flowing to the commercial sector.
Companies also have limited access to bond funding because India's corporate bond market is underdeveloped.
Bond issues are mostly available to companies with the highest credit ratings.
The article says rate hikes are coming, but credit growth should not be ruled out.
RBI research finds a two-way relationship between credit and economic growth, and between credit and investment growth.
Credit flows can support investment and GDP growth, while a growing economy can increase demand for bank credit.
The article says strong economic growth is likely to be accompanied by strong credit growth.
In 2025-26, non-food credit accounted for 62% of the total flow of resources to India's commercial sector.
Bank financing is important in India because its corporate bond market is underdeveloped and bond issuance is limited to the highest-rated companies.
- Who
- The Reserve Bank of India and India's commercial sector.
- What
- RBI research describes a two-way relationship between credit, investment growth, and economic growth.
- Where
- India.
- When
- The article cites data for 2025-26.
- Why
- Credit can support investment and GDP growth, while economic growth can raise demand for bank credit.
Key facts
- Research source
- Reserve Bank of India research
- Relationship described
- Credit and economic growth, as well as credit and investment growth, affect each other.
- Non-food credit share
- 62% of the total flow of resources to the commercial sector in 2025-26
- Main corporate funding source
- Banks
- Bond market constraint
- The corporate bond market is underdeveloped, and bond issuance is limited to the highest-rated companies.
Sources
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