Bank credit growth slows to 9.8% in May as NBFC, retail lending dips

The annual pace of bank lending across retail, agriculture, industry and services sectors slowed down in May 2025 against the same period last year on sharp moderation in segments like personal loan, vehicle loans and shrinking of credit to finance companies, according to Reserve Bank of India (RBI) data.

 

Bankers said besides subdued activity in the first quarter, the slowdown could be attributed to a high base effect and muted growth across segments, including retail.

 

The non-food bank credit as on the fortnight ended May 30, 2025, grew by 9.8 per cent on a year-on-year (Y-o-Y) basis as compared to 16.2 per cent during the corresponding fortnight of the previous year (May 31, 2024), RBI said in a statement.

 

The non-good credit had posted 11.2 per cent Y-o-Y growth in April 2025 as against 15.3 per cent in April 2025.

 

The banking regulator collected bank credit data for May 2025 from 41 select scheduled commercial banks (SCBs), accounting for about 95 per cent of the total non-food credit by all SCBs.

 

Rating agency ICRA said the credit growth is estimated at 10.4-11.3 per cent for the financial year 2026 (FY26). The challenges in mobilising deposits and stress in the retail unsecured segment to continue weighing down growth, it added. 

 

The retail credit growth decelerated 13.7 per cent Y-o-Y in May 2025 as compared with 19.3 per cent Y-o-Y a year ago. The other personal loans, which are predominantly unsecured credit, dipped to 8.3 per cent Y-o-Y from 17.1 per cent Y-o-Y a year ago. The credit card outstanding, a barometer of consumer spending, also witnessed a downturn with 8.5 per cent growth in May 2025 as against 26.2 per cent a year ago.

 

Vehicle loans also showed moderation at 8.7 per cent as against 18.4 per cent.

 

The credit to industry recorded a Y-o-Y growth of 4.9 per cent in May 2025, compared with 8.9 per cent a year ago. Among major industries, outstanding credit to ‘all engineering’, ‘construction’ and ‘rubber, plastic and their products’ recorded an accelerated Y-o-Y growth.

 

The credit to services sector moderated to 9.4 per cent Y-o-Y from 20.7 per cent in the same period in May 2024, primarily due to decelerated growth in credit to non-banking financial companies (NBFCs). The bank lending to NBFCs showed a negative growth of 0.3 per cent Y-o-Y in May 2025 as against 16 per cent in May 2024. Credit growth to the computer software segment remained robust.

 

Finally, lending for agriculture and allied activities registered a Y-o-Y growth of 7.5 per cent, down from 21.6 per cent in the corresponding fortnight in May 2024.