India Private Banks: Loan Growth Surges, Funding Squeeze Intensifies

India’s major private banks are reporting their strongest loan growth in over a year, primarily driven by a sharp rebound in corporate credit.

This expansion comes as the borrowing cost gap between traditional bank loans and bond markets has narrowed, making bank financing more competitive for businesses.

Axis Bank, for instance, has recorded up to 38% growth in this segment, though much of this increase reflects working capital requirements rather than new capital expenditure.

Funding Challenges and Margin Pressures

Despite robust loan growth, these banks are confronting significant margin compression. This pressure stems from declining low-cost Current Account Savings Account (CASA) deposit ratios.

To bridge funding gaps, banks are increasingly turning to other avenues. These include FCNR(B) foreign currency deposits and securitization.

While effective in securing funds, these alternative methods can also exert additional pressure on overall margins. Although deposit costs are easing, the shift towards lower-yielding corporate loans is now impacting profitability.

Evolving Market Dynamics

The banking sector is also navigating other shifts. Concerns surrounding unsecured lending have reportedly eased, contributing to a more stable environment for certain credit products.

Geopolitical risks, particularly in West Asia, are also being monitored. Furthermore, upcoming changes such as expected credit loss provisioning are anticipated from April 2027, which will reshape risk management practices.

Makhana: From Crop to Global Snack

Makhana, or fox nuts, a traditional wetland crop predominantly from Bihar, is transforming into a booming global wellness snack.

Bihar alone produces 80% of India’s supply, fueling a market currently valued at ₹8,500 crore and projected to reach ₹12,000 crore by 2030.

This growth is largely driven by modern branding efforts, positioning makhana as a healthy alternative to fried snacks, with significant international demand; the US imports 40% of the global supply.

Production and Value Chain Hurdles

The production process for makhana remains arduous and labor-intensive. It involves manual collection of seeds from pond beds, followed by cleaning, drying, and popping them with a wooden hammer.

Despite rising average domestic prices, which climbed from ₹500/kg in 2020 to ₹1,250/kg in 2025, farmers historically capture less than 28% of the final retail price.

This significant value chain problem highlights a deep reliance on intermediaries, limiting farmer income and economic upliftment.

Government Intervention and Future Outlook

To address these challenges, the National Makhana Board was launched in September 2025. It is supported by a ₹476 crore central scheme.

The initiative aims to establish local processing hubs, foster farmer cooperatives, and enhance cultivation and post-harvest practices. This strategy seeks to ensure a greater share of value accrues directly to farmers in Bihar.

The “Mithila Makhana” has also secured a Geographical Indication (GI) tag, providing protection for its origin and promoting local producers. However, the concentration of production in Bihar introduces climate change risks, including water shortages and uneven rainfall.