Corporates are depending less on bank loans as they sit on higher cash reserves, deleverage their balance sheets, inject higher equity through capital markets and look at alternate avenues such as private credit.

The share of corporate loans in total bank credit has consistently declined over the last 14 years. The segment share stood at 36% in FY25, down 22% from 58% in FY11.

“The bank lending mix has changed dramatically over 15 years. Corporate credit is moving away from banks as alternate funding provides more end-use flexibility,” consulting firm BCG said in a report released at FIBAC 2025. 

Corporate credit’s share in the overall bank loan mix fell sharply by 11% in the last five years to 47% in FY20, while declining continuously over a longer period. In FY15, it was at 55%.

The share of retail loans, on the other hand, has grown to 33% of total bank credit in FY25. This stayed flat at 18% in FY11 and FY15, before climbing by 8% to 26% in FY20 and then gaining by 7% in the next five years.  

For the other two segments, the change in loan share has been less significant. While in agriculture it has remained nearly same at 13% in FY25 from 12% in FY11, in the MSME (micro, small and medium enterprises) segment it has grown to 18% from 12%.

While corporate funding has shifted away from banks, their reliance on bonds and debentures has increased. 

Data of over 6,000 listed companies examined by BCG showed that the dependence of corporates on bank loans declined in a decade to 46% in FY24 from 69% in FY14, while their reliance on bonds and debentures has more than doubled to 29% from 14% during this period.

State Bank of India chairman CS Setty also highlighted the issue of corporates shifting to capital markets and private credit for their long-term financing requirements while speaking at a panel discussion in the same event. He pointed out that corporates, having deleveraged, are sitting on cash balances of Rs 13.5 trillion, which they are utilising for their capex expansion and brownfield investments. They are also having access to capital markets and private credit.  

Bank funding has been shifting towards short term capital for existing projects while alternate funding such as private credit, external commercial borrowing (ECB), AIFs and REITS are offering long term capital to the corporates.

The share of term loans in bank credit to corporates has fallen to 36% in FY25 from 45% in FY19, according to the BCG report. In contrast, working capital share has increased to 64% from 55% during this period.

“Banks will need to play a dominant role to fund new capex required across emerging, sunrise sectors as well as to fund future infrastructure development,” the report said.