Loan growth dips in farm, services; MSMEs see sharp rise in June

The sharp moderation in loan offtake in farming plus allied activities and services sector dragged the pace of banks’ non-food credit down to 10.2 per cent year-on-year (Y-o-Y) in the fortnight ended June 27, 2025 from 13.8 per cent growth reported during the same period a year ago.

 

The pace of credit growth on a Y-o-Y basis in retail and industrial credit also moderated in June 2025, Reserve Bank of India (RBI) data showed.

 

The RBI, in a statement, said, the credit to the services sector moderated substantially to 9.6 per cent Y-o-Y at the end of June 27, 2025, from 15.1 per cent Y-o-Y growth in the same period in June 2024.

 

The Y-o-Y growth in bank loans to non-banking financial companies (NBFCs) nosedived to 2.6 per cent, from 8.5 per cent a year ago. Likewise, loans to the trade segment declined to 10.8 per cent from 14.8 per cent in June 2024. The data excludes the impact of merger of housing finance company HDFC with HDFC Bank.

 

Credit growth to agriculture and allied activities was down to 6.8 per cent Y-o-Y in the fortnight ended June 27, 2025, from 17.4 per cent a year ago, the RBI said.

 

Bankers pointed out that besides weak demand, the credit growth was subdued in the April-June period as they are more engaged in recoveries, audits and compliances for the financial year concluded in March. 

 

The retail loan growth declined to 14.7 per cent Y-o-Y in June 2025 from 16.6 per cent Y-o-Y a year ago, largely due to moderation in credit in the personal loan segment, vehicle loans and credit cards, RBI said.

 

The growth in the other personal loan category, which consists mainly of unsecured credit, fell to 9.1 per cent Y-o-Y from 13.1 per cent Y-o-Y in June 2024. The credit growth in the housing sector, the largest constituent of the retail segment, stood at 14.4 per cent, down from 18.2 per cent.

 

Credit to industry stood at 5.5 per cent Y-o-Y in June 2024 compared with 7.7 per cent a year ago. The credit to large industries slumped to 0.8 per cent in June 2025 from 6.9 per cent a year ago.

 

Among the few areas where loan growth improved is micro, small and medium (MSMEs) industries. The pace of credit to micro and small industries improved to 19.3 per cent in June 2025 from 11.0 per cent in June 2024. The medium sized industries also saw a small improvement at 13.1 per cent as against 12.6 per cent a year ago.

 

Among major industries, outstanding credit to all engineering, construction and textiles recorded an accelerated Y-o-Y growth, RBI added.