Reserve Bank of India (RBI) data showed that overall bank credit growth declined to 11 per cent in FY25 from 20.11 per cent in FY24.
In absolute terms, bank lending grew by ₹18.11 trillion in FY25 against ₹27.56 trillion in FY24. The data includes the impact of the merger of a non-bank (HDFC) with a bank (HDFC Bank).
The agriculture and allied sector credit grew by 10.4 per cent in FY25, down from 20 per cent in FY24.
For industry, it was 7.8 per cent in FY25 over 8.5 per cent in FY24 and services 12.4 per cent in FY25, down from 23.5 per cent a year ago.
Sanjay Agarwal, senior director, CARE Ratings, said moderation is to be seen from the point of high base effect of FY24. This is due to the housing finance company’s merger with the bank and surge in demand for credit which came in the post pandemic period.
The RBI repeatedly expressed concern in the rapid growth of retail credit and rising defaults in unsecured loans.
The banking regulator hiked the risk weights in November 2023 for unsecured loans and credit to non-banking financial companies (NBFCs) to contain risk in the system.
RBI also asked banks with high credit-to-deposit ratios to revisit business models. These steps saw an impact — decline in pace of credit in FY25.
The regulated entities turned cautious in disbursing credit and tightened underwriting norms, bankers said.
In the retail segment, home loans saw a growth of 10.7 per cent in FY25, down from 36.5 per cent in FY24.
Credit card outstanding growth was 10.6 per cent against 25.6 per cent in FY24 and the vehicle loans segment saw a dip to 8.6 per cent from 17.6 per cent.
Personal credit, which is mostly unsecured loans, grew by 7.9 per cent in FY25, down from 20.7 per cent in FY24, RBI data showed.
The growth in gold loans surged to 103.5 per cent in FY25 from 14.8 per cent in FY24.
The sharp rise in gold loans is partly due to reclassification of agricultural loans as gold loans, bankers said.
 "Retail credit")