Bank Credit Growth Slows to 12% in FY25 Amid Regulatory Curbs

India’s overall bank credit growth moderated to 12% in FY25, down from 16% in the previous year, reflecting both regulatory tightening and the base effect, according to the Reserve Bank of India’s (RBI) latest data on sectoral deployment of credit. 

Regulatory Curbs Impact Retail and Services Lending 

A significant portion of the slowdown stemmed from stricter regulatory norms, particularly in retail and unsecured credit segments. Retail credit, which has been a key driver of overall credit growth in recent years, grew by 14% year-on-year (y-o-y) as of March 21, 2025, down from 17.6% in the previous year. The deceleration was led by slower growth in ‘other personal loans,’ ‘vehicle loans,’ and ‘credit card outstanding.’ 

Similarly, lending to the services sector rose by 13.4% y-o-y compared to 20.8% a year ago. The RBI attributed this moderation primarily to a slowdown in credit growth to non-banking financial companies (NBFCs), though lending to professional services and trade segments remained robust. 

Agriculture and Industry Credit Growth Eases 

Credit to agriculture and allied sectors also saw a sharp deceleration, registering a growth of 10.4% in FY25 compared to 20% in FY24. Meanwhile, lending to the industrial sector remained largely flat at 8% y-o-y, mirroring last year’s pace. However, within industry, certain sub-sectors like petroleum, coal products, nuclear fuels, metals, and engineering showed improved credit growth, even as infrastructure credit lagged. 

Growth in Gold and Renewable Energy Loans 

Amid broader credit moderation, loans against gold jewellery surged significantly, more than doubling year-on-year, on the back of a nearly 50% rise in gold prices. Additionally, loans to the renewable energy sector recorded an impressive 79% growth, a sharp rise from 30% in the previous year, highlighting rising interest in clean energy investments. 

Also Read: Key Trends to Watch in May 2025: Indian Stock Market to Witness Several Events! 

Conclusion 

The deceleration in overall bank credit growth in FY25 reflects a mix of policy tightening, sector-specific factors, and the base effect. While retail and NBFC lending moderated, bright spots emerged in renewable energy and gold-backed loans, pointing to evolving credit preferences in the Indian economy. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.