Bank credit expansion in India drastically decelerates from 19.5% to 9.8% during May 2025, according to State Bank of India.
Slowdown in Credit Growth Across Major Sector in April 2025: SBI Report
India's scheduled commercial banks (SCBs) experienced a significant drop in credit growth in May 2025, according to a recent report by the State Bank of India (SBI). The sharp decline marks a contrast to the robust 19.5% credit growth the banks recorded in the same period last year, suggesting a broad-based deceleration in lending activities across the economy.
Data from the SBI report reveal that the credit growth for SCBs fell to 9.8% year-on-year in May 2025, a steep decline from the robust growth witnessed a year earlier. Moreover, bank credit had actually declined by Rs 15,676 crore during the first two months of the current financial year (April-May 2025), and this negative year-to-date (YTD) growth represents a stark contrast to the Rs 1.68 lakh crore increase (1.0% YTD growth) recorded in the same period in 2024.
The report illustrates a slowdown in credit growth across several major sectors, with agriculture and allied sectors seeing a decrease in growth to 9.2%, down from 19.8% a year earlier. Meanwhile, industrial sector credit slightly dipped to 6.6%, as opposed to the 7.4% growth witnessed in the previous year.
However, certain sectors within the industrial segment, such as basic metals, engineering, transport equipment, textiles, and construction, experienced marginal gains in credit flow. Conversely, the credit to the infrastructure sector continued to lose momentum. The services sector experienced the sharpest decline in credit growth, dropping to 10.5% in April 2025 from 22.0% a year earlier, primarily due to a significant slowdown in lending to non-banking financial companies.
While bank deposits continued to grow, their pace of growth was also slower than in the previous year, indicating a moderation in overall banking activity. During April-May 2025, deposits increased by Rs 3.06 lakh crore (1.4% YTD), compared to Rs 3.39 lakh crore (1.7% YTD) in the same months last year. Within the retail loans segment, growth decelerated to 14.5% year-on-year, mainly due to weaker demand for vehicle loans, credit card debt, and other personal borrowing.
The deceleration in credit growth across multiple sectors, combined with relatively slower deposit growth and overall cautious lending by banks, suggests a cautionary approach to credit expansion in the current year. Despite the slowdown, resilience remains in certain segments, such as trade and computer software services in the services sector. Additional factors contributing to the deceleration in credit growth require further investigation for a complete understanding of the evolving economic landscape.
The SBI report indicates a slowdown in credit growth not only for India's scheduled commercial banks but also across major sectors like agriculture, industry, and services in May 2025, contrasting the robust growth seen in the same period the previous year. This deceleration in lending activities might stem from a cautious approach to credit expansion in the current financial year, as bank credit actually declined by Rs 15,676 crore during April-May 2025, a significant contrast to the growth recorded in the same period in 2024. The finance sector, specifically non-banking financial companies, is experiencing a significant slowdown in lending, which could be contributing to the overall decline in credit growth. Despite this, segments such as trade and computer software services in the services sector are demonstrating resilience, indicating that the entire economy may not be facing a stagnating financial situation.
