Construction Equipment Loan Growth Slows in Q3FY26 as Infra Spending Remains Weak

Construction equipment (CE) loan growth witnessed a clear slowdown in the third quarter of FY26, reflecting muted infrastructure spending by both state and central governments. Senior executives from leading banks, non-banking finance companies and industry bodies pointed to delayed project execution and cautious capital outlay as key reasons behind the softer lending and sales environment.

Ashok Vaswani, Managing Director and Chief Executive Officer of Kotak Mahindra Bank, said the slowdown was visible across the industry, particularly due to reduced demand from state governments. He noted that growth in the CE segment was largely in line with industry trends and expressed hope that demand would revive as infrastructure activity picks up in the coming months.

Umesh Revankar, Executive Vice Chairman of Shriram Finance, highlighted that construction equipment continued to lose share in the company’s overall assets under management during the quarter. According to him, overall construction activity, especially in infrastructure, remained subdued. He added that future demand would largely depend on the Union Budget and clarity on project execution in the previous and upcoming financial years.

During Q3, Shriram Finance’s construction equipment loan book declined sharply on both a year-on-year and quarter-on-quarter basis, while its share in total AUM fell significantly compared to last year. Kotak Mahindra Bank also reported only marginal sequential growth in its commercial vehicle and construction equipment portfolio. Other lenders, including Tata Capital, saw a slight reduction in CE loan contribution to their overall AUM.

Industry data further underlined the slowdown. According to the Indian Construction Equipment Manufacturers’ Association, total CE sales declined year-on-year during the quarter, with domestic demand remaining weak even as exports recorded healthy growth. Industry leaders noted that infrastructure-related headwinds and the transition to new emission norms affected purchasing decisions and asset valuations.

Despite near-term challenges, industry stakeholders remain cautiously optimistic. Recent months have shown early signs of stabilisation, supported by sequential improvement in sales. Lenders and manufacturers believe that faster project awards, improved execution at the state level, higher infrastructure capital expenditure and better credit availability could help revive domestic construction equipment demand in the coming quarters.