Overview

• RBI data show non-food credit growth eased to 9.8% year-on-year in May from 11.2% in April, even as annualised expansion ticked up to 10.4% by June 27.
• Banks passed full 100 bp repo rate cuts onto external benchmark loans but trimmed MCLR by just 10 bp and cut fresh term deposit rates by about 51 bp on average.
• Lending to NBFCs contracted 0.3% in May while personal loan growth slowed sharply, though housing and MSME credit continued to hold up.
• A durable liquidity surplus of nearly ₹6 lakh crore and corporate cash reserves estimated at ₹13.5 lakh crore have driven firms toward commercial paper and bond markets.
• Net interest margins contracted by up to 67 bp in Q1 FY26, reinforcing banks’ risk aversion and leading analysts to trim FY26 credit growth forecasts to around 11–12%.