Bank lending across retail, agriculture, industry, and services slowed down in May 2025 compared to the same month last year. This slowdown was driven by a sharp drop in personal loans, vehicle loans, and a decline in credit to finance companies, according to the Reserve Bank of India (RBI).
Bankers say the weak activity in the first quarter, combined with a high base last year, contributed to the slowdown. They also point to slow growth across many segments, including retail lending.
Non-food bank credit increased by 9.8% from the previous year, as of the fortnight ending May 30, 2025. This is lower than the 16.2 percent growth seen during the same period in 2024, the RBI noted.
In April 2025, non-food credit grew by 11.2% year-on-year, down from 15.3% the year before.
The RBI collected data from 41 scheduled commercial banks, which account for about 95% of total non-food credit.
Rating agency ICRA estimates credit growth at around 10.4 to 11.3% for the fiscal year 2026. They say deposit mobilization issues and stress in retail unsecured loans will slow growth further.
Retail credit growth slowed to 13.7% from 19.3 percent last year. Personal loans, which are mostly unsecured, fell to 8.3% from 17.1%. Credit card debt, a sign of consumer spending, also dropped from 26.2% to 8.5%
Loans for vehicles showed similar signs of moderation, rising just 8.7% compared to 18.4% in the previous year.
Credit to industries increased by 4.9% in May 2025, down from 8.9% last year. Some sectors, such as engineering, construction, and rubber products, saw faster growth.
Lending to the services sector slowed to 9.4% from 20.7% a year earlier. This was mainly due to weaker credit to non-banking finance companies (NBFCs). In May 2025, loans to NBFCs declined by 0.3%, unlike the 16% rise the year before. Meanwhile, the software segment kept up a strong pace.
Lending to agriculture and related activities grew by 7.5%, much slower than the 21.6% growth seen in May 2024.