PSU banks lead incremental credit while share of private banks falls

The state-owned banks continued to be the major drivers of incremental credit, while the share of private sector banks has declined, the Reserve Bank of India (RBI) said in a bulletin. At the same time, banks’ credit growth moderated to 12 per cent in FY25 from around 15 per cent in March 2023.

 

Although non-food credit increased at a decelerating pace of 12 per cent year-on-year (Y-o-Y), compared to 16.3 per cent a year ago, according to the bulletin. Meanwhile, agricultural credit growth remained in double digits at 11.4 per cent in February 2025, though it moderated from 20.0 per cent in February 2024. Despite some deceleration in the growth of credit to the services sector and personal loan segments at 13.0 per cent and 14.0 per cent, respectively, in February 2025, they remained the prime drivers of non-food credit growth during the second half of FY25.

 

 

Further, the bulletin mentioned that credit to the micro, medium and small enterprises (MSME) segment remained robust, registering a growth of 12.3 per cent in February 2025. However, credit to the large industry segment recorded modest growth in H2. In the Union Budget for FY26, the credit guarantee cover for micro and small enterprises was increased from Rs 5 crore to Rs 10 crore. Going forward, the MSME sector is expected to receive a boost in credit due to changes in classification and priority sector lending treatment.

 

On the other hand, credit growth to the services sector moderated in H2, mainly attributed to decelerated credit growth to non-banking financial institutions (NBFIs). Credit growth of non-banking financial companies (NBFCs) fell to 13.3 per cent in February 2025 from 18.6 per cent in February 2024, reflecting the impact of the increase in risk weights, which has now been reversed effective April 1, 2025.