Industry credit growth slows to 6% in July; bankers expect momentum ahead

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Credit to industry grew 6 per cent year-on-year (Y-o-Y) in the fortnight ended July 25, compared to 10.2 per cent in the same period last year, the Reserve Bank of India (RBI) data showed. This is marginally higher than the 5.5 per cent growth recorded in June. 

During this period, credit to micro industries grew 21 per cent, while credit to medium industries rose 14.7 per cent. In contrast, credit to large industries increased by only 0.9 per cent. 

Overall bank credit in the fortnight ended July 25 grew 9.9 per cent, compared to 13.6 per cent during the same period the previous year (July 26, 2024). 

In Q1FY26, Indian corporates increasingly moved away from bank funding towards alternative sources such as equity and bond markets as their deleveraged balance sheets improved their ability to raise equity at better valuations. At the same time, the debt capital market was offering better rates after the RBI cut the policy rate by 100 basis points. 

That said, bankers remain hopeful that with corporate bond yields hardening and better transmission of policy rates to loan rates, credit to industry will improve going forward. 

Recently, State Bank of India Chairman C S Setty, said: “Most of the banks have witnessed one of the most anaemic corporate credit growths in recent times in Q1.” He noted that major overhangs in the banking sector — such as liquidity coverage ratio (LCR) norms and project financing norms — are now behind them, and banks are well-positioned going forward.