Credit Pulse Check: RBI’s May 2025 Data Reveals Slower Growth, Sectoral Divergence in Bank Lending

The Reserve Bank of India’s latest sectoral deployment of bank credit data for May 2025 paints a mixed picture of India’s credit landscape. While overall non-food credit grew at a moderate pace, the data reveals sharp divergences across sectors, with agriculture and unsecured retail lending witnessing notable slowdowns, even as gold loans and industrial credit held steady.

Here’s a comprehensive breakdown of the trends and what they signal for the broader economy.

Key Credit Trends and Sectoral Highlights

- Non-food bank credit grew 11.2 percent year-on-year as of April 18, 2025, down from 15.3 percent in the same period last year  
- Credit to agriculture and allied activities dropped sharply to 9.2 percent growth, compared to 19.8 percent a year earlier  
- Industry credit rose 6.7 percent to Rs 38.83 lakh crore, slightly below the 6.9 percent growth recorded in the previous year  
- Services sector credit growth moderated to 11.2 percent from 19.5 percent, largely due to a slowdown in lending to NBFCs  
- Retail credit expanded by 14.5 percent, down from 17 percent, with vehicle loans and credit card outstandings showing particular weakness  
- In contrast, gold loans surged 119.6 percent year-on-year to Rs 2.23 lakh crore, up from Rs 1.01 lakh crore  

Underlying Drivers and Regulatory Impact

- The slowdown in unsecured lending follows the RBI’s regulatory tightening in late 2024, which raised capital requirements for such loans  
- High base effects from FY24 also contributed to the lower growth percentages across several segments  
- Credit to trade and computer software services remained resilient, reflecting continued demand in select service verticals  
- The RBI’s recent rate cuts and liquidity measures are expected to gradually revive credit momentum in the coming quarters  

Industry-Specific Observations

- Within industry, segments like basic metals, engineering, vehicles, textiles, and construction saw improved credit offtake  
- Infrastructure lending, however, decelerated, likely due to cautious lender sentiment ahead of the new project finance norms effective October 2025  
- The RBI’s revised provisioning rules for infrastructure loans are expected to support a medium-term recovery in this segment  

Outlook and Policy Implications

- Analysts expect credit growth to rebound to 13–13.5 percent in FY26, supported by private capex revival and easing monetary conditions  
- Deposit growth has outpaced credit expansion, putting downward pressure on the credit-deposit ratio  
- The RBI’s focus remains on balancing financial stability with credit availability, especially in high-risk retail and NBFC segments  

As India navigates a complex macroeconomic environment, the RBI’s May 2025 credit deployment data offers a timely snapshot of shifting credit dynamics—highlighting both the resilience and vulnerabilities within the banking system.

Sources: Indian Express, Outlook Money, Economic Times, June 2025