Industrial credit falls behind retail lending as banks report uneven growth in June 2025 RBI numbers

Why are Indian industries holding back from borrowing even when loan rates are falling? This question stands out after the Reserve Bank of India released its sectoral credit report for June 2025.

The data shows that bank credit to industries slowed sharply to 7.6 per cent year-on-year. A year earlier, in June 2024, it had grown at 11.3 per cent. Overall bank credit also lost speed, slipping to 9.9 per cent from 15 per cent in June 2024.

Bank Credit Growth To Industries June 2024 Vs June 2025

Industrial credit is always seen as a key measure of business investment. Companies borrow from banks to fund factories, projects, and equipment. A slowdown in industrial credit growth shows fewer new investments.

The RBI’s June 2025 report highlights this change. The share of industries in total credit fell to 23.3 per cent in the first quarter of FY26, down from 23.8 per cent in the first quarter of FY25.

Table: Bank Credit Growth To Industries And Overall Credit

Year	Industrial Credit Growth (YoY)	Overall Bank Credit Growth (YoY)	Industrial Share of Total Credit
June 2024	11.30%	15.00%	23.80%
June 2025	7.60%	9.90%	23.30%

This table shows the fall is sharper in industrial lending compared to overall bank lending. It reflects that many companies are either postponing new projects or choosing to use their own funds instead of borrowing from banks.

Public Banks Still Drive Industrial Credit

The June 2025 RBI report also highlights the role of different banks in industrial lending. Public sector banks continued to dominate the space. They recorded 11 per cent growth in industrial credit in June 2025. Private banks posted slower growth of 8.3 per cent, while foreign banks grew at 8 per cent.

Table: Bank-Wise Industrial Credit Growth In June 2025

Bank Category	Growth in June 2025	Share in Industrial Credit
Public Sector Banks	11.00%	53.70%
Private Banks	8.30%	36.00%
Foreign Banks	8.00%	10.30%

The gap between public and private banks has widened. This shows industries still trust large state-owned banks for long-term loans. Private banks continue to focus more on retail credit, while public banks remain the backbone of industrial lending.

Deposit Shifts And Industrial Credit Growth Rate

Bank credit growth depends on deposits, which are the main source of funds for banks. The June 2025 RBI report notes important shifts in deposits. Term deposits grew strongly by 13.5 per cent. Savings deposits rose only 5.4 per cent. Term deposits now make up 62.2 per cent of all deposits compared to 61 per cent in June 2024.

Table: Deposit Growth And Share In June 2025

Deposit Type	Growth Rate	Share in Total Deposits (June 2025)
Term Deposits	13.50%	62.20%
Savings Deposits	5.40%	28.00%
Current Deposits	6.00%	9.80%

The move towards term deposits shows households prefer fixed income even as interest rates fall. Banks must adjust their lending plans as customers prefer locking funds in deposits. This change impacts liquidity and lending strategies.

Slowdown In Lending Despite Lower Rates

Interest rates are lower today than last year. The RBI report notes that the weighted average lending rate (WALR) fell by 39 basis points between April and June 2025. More loans are now priced below 9 per cent. In June 2025, 54.1 per cent of loans were below this rate, compared to 43.2 per cent in June 2024.

Table: Lending Rates And Loan Share Changes

Metric	June 2024	June 2025	Change
WALR Drop	—	-39 bps	Lower
Loans Below 9%	43.20%	54.10%	Higher
WALR Impact	Limited	Visible	Moderate

The lower rates should have boosted borrowing by industries. But this has not happened. Instead, retail credit, especially personal loans, has grown much faster. Housing loans now form more than half of personal credit in India.

Wider Impact Across Non-Food Credit

The slowdown is not limited to industries. The June 2025 RBI report shows that non-food credit growth also slipped. It slowed to 10.2 per cent at the end of June 2025, compared to 13.8 per cent in June 2024. Lending to agriculture and services also lost speed.

This wider trend shows weak credit demand across the economy. While banks are ready to lend, industries and households are showing more caution in taking loans.

Banks Stay Strong Despite Slowdown

The RBI’s June 2025 Financial Stability Report underlines that the slowdown is not due to weak banks. In March 2025, the gross non-performing asset (NPA) ratio was at 2.3 per cent. This is the lowest in many years. The capital adequacy ratio stood at 17.2 per cent, showing banks are well capitalised.

This proves the problem lies not in bank health but in low demand for loans. Industries are waiting for stronger demand before committing to large projects.

Outlook For Bank Credit Growth In India

Experts expect a revival in credit growth in FY26. Rating agencies like India Ratings and Research believe the recent RBI rate cuts will show stronger results in the coming quarters. However, there are concerns about rising defaults in retail credit, especially in credit cards, which may slow recovery.

The RBI itself has said that banks are prepared to lend. But industries remain cautious. If demand stays weak, the investment cycle may get delayed. This would affect job creation and capacity expansion.

Conclusion

The RBI’s June 2025 sectoral credit report shows that bank credit to industries slowed to 7.6 per cent, the weakest in recent years. The share of industries in total credit slipped, while retail and personal loans rose faster. Public sector banks remain the main source of industrial lending, while private banks continue to focus on retail growth.

The shift in deposits towards term accounts and the drop in lending rates reflect changing patterns in India’s banking system. The financial health of banks remains strong, but industries are still waiting for demand to improve before borrowing more. The next few quarters will decide whether the credit slowdown ends or continues.

Other News Pages
September 2025 Personal Loan Rates: Lowest Bank Offers	Less Than 20% Yuva Loans Sanctioned	GST Update: What’s Cheaper & Costlier in 2025
September 2025 Bank Holidays: Full State-Wise List	PSBs Overtake Private Banks in Home Loan Market	RBI Issues New AePS Guidelines
Rupee Hits Record Low Amid Tariff Tensions	Rupee Falls to 88 vs Dollar on US Tariff Impact	RBI Camp Expands Financial Inclusion at Bannerghatta
Bank Credit to Industries Growth Slows to 7.6%	India Back in Current Account Deficit: RBI Data	Despite Repo Cut, Bank Lending Rates Climb
RBI Forex Reserves Shift: Gold Up, US Bonds Down	15th Finance Commission: Deficit & Spending Insights	Net ECB Inflows Rise to $4.6B in Apr-Jun 2025