Banks and non-banking finance companies (NBFCs) have registered a notable decline in construction equipment (CE) loan growth in Q3FY26, largely due to lack of spending by both state and central government for infrastructure development projects, senior industry members say.
Says Ashok Vaswani, MD & CEO, Kotak Mahindra Bank (KMB), “On the CE segment, definitely at the industry level we have seen quite a slowdown. And a lot of this slowdown is because demand from state governments for CEs has kind of moderated. We are hoping that this picks up and overall industry levels go up. Our growth is very much in-line with industry levels.”
Umesh Revankar, executive vice-chairman, Shriram Finance, says CE’s share in the NBFC’s overall asset under management (AUM) continued to decline in Q3. “There has been a slowdown in overall construction activity, especially in the infrastructure sector. The future demand will depend on Union Budget, at least we will know what projects were executed in last financial year and plans for next fiscal. Everything hinges on the Finance Minister’s plans,” he said.
Shriram Finance’s CE loans stood at Rs 14,219 crore in Q3, 20 per cent lower year-on-year (y-o-y) and 7 per cent quarter-on-quarter (q-o-q). Share of CEs in the NBFC’s AUM reduced to 4.87 per cent in Q3 from 7.02 per cent a year ago. KMB’s commercial vehicle and CE book rose just 2 per cent q-o-q to Rs 44,517 crore. CE loans contributed to 2.3 per cent of Tata Capital’s net AUM in Q3, lower than 2.5 per cent a quarter ago.
CE sales slowdown
According to industry body Indian Construction Equipment Manufacturers’ Association (ICEMA), in Q3FY26, total CE sales declined 9 per cent y-o-y, and for April–December 2025 overall industry volumes stood at around 94,000 units, reflecting a 5 per cent decline, driven by a 10 per cent contraction in domestic sales even as exports grew strongly by 28 per cent.
Deepak Shetty, President, ICEMA and MD, CEO at JCB India, says domestic demand for CEs in calendar year 2025 remained muted. The growth of CE industry is significantly dependent on infrastructure development projects which experienced some headwinds, he says.
“This was also a period of adjustment for customers after the CEV Stage V emission standards came into effect, which impacted the asset value of our products. However, at a broader level we remain hopeful of demand coming back as infrastructure development has always been a focus area for the Government, particularly Rural Infrastructure, which is a key growth driver for our Industry,” Shetty said.
“Encouragingly, recent months have shown early signs of stabilisation, with December recording a 2% month-on-month improvement in overall sales despite a year-on-year decline. With faster project awards at Central and State level, improved execution at state level and supportive policy measures, particularly higher infrastructure capex and better credit availability, industry remains optimistic about a recovery in domestic CE demand in the coming quarters,” he added.
Narendra G Kamath, COO – SME Finance, Tata Capital, says while December showed early signs of stabilisation with sequential improvement in sales, lending activity is likely to pick up meaningfully only as project awards accelerate, execution improves and cash flows at the contractor level normalise. “From a lender’s standpoint, we see this as a critical transition phase and remain optimistic about a recovery as infrastructure spending regains momentum,” he said. ENDS
Published on January 25, 2026
