By Mr. Abhay Ray 
Mumbai, September 2025 – India’s banking sector witnessed a marked deceleration in credit growth in June 2025, according to data released by the Reserve Bank of India (RBI). While overall credit growth slowed, personal loans surged to record levels, industrial lending weakened, and deposit patterns shifted in favor of term deposits—reflecting both structural and monetary policy dynamics.
Bank Credit Growth Slows
Overall bank credit growth moderated to 9.9% year-on-year in June 2025, a significant decline from 15% growth a year earlier. The slowdown underscores a cooling in demand from industries and corporates, even as individuals continue to fuel borrowing momentum.
Within this trend, industrial credit growth dropped to 7.6% in June 2025, compared with 11.3% in June 2024. Industrial loans now account for 23.3% of total credit, slightly down from 23.8% a year ago. This indicates muted investment appetite from corporates, possibly due to global economic headwinds and domestic policy recalibrations.
Personal Loans Take Center Stage
In contrast, personal loans continued to outpace all other segments, growing faster than overall advances and now constituting 32% of total bank credit. Within this category, housing loans remain the primary driver, comprising more than half of all personal loans.
The share of individuals in total credit rose to 47.2% in June 2025, up from 46.5% a year ago. Another notable trend was the rising share of female borrowers—women accounted for 23.7% of individual credit, slightly higher than 23.4% last year, reflecting growing financial inclusion and participation.
Lending Rates Ease with Monetary Policy
The RBI noted that the share of loans bearing interest rates below 9% increased to 54.1%, up from 43.2% in June 2024. This was largely the result of monetary policy easing in recent quarters.
The Weighted Average Lending Rate (WALR) on outstanding credit declined by 39 basis points (bps) during April–June 2025, with reductions spanning across major sectors. This easing of rates has helped retail borrowers, especially in the housing segment, even as industrial borrowers appear cautious in leveraging the lower cost of funds.
Public Sector Banks Lead Credit Growth
Public sector banks (PSBs) have taken the lead in driving credit expansion. In June 2025, PSBs registered 11% growth in credit, outpacing both private banks (8.3%) and foreign banks (8.0%). As a result, PSBs maintained their dominant position, holding 53.7% of total bank credit.This shift highlights the continued relevance of state-owned lenders in advancing India’s credit cycle, particularly in underserved regions and in priority sectors.
Deposit Growth: Term Deposits Outpace Savings
On the liabilities side, deposits grew robustly, with a significant tilt toward term deposits. Bank term deposits grew 13.5% in June 2025, well above the 5.4% growth in savings deposits. Consequently, the share of term deposits in total deposits rose to 62.2%, from 61% a year earlier.
A bulk of these deposits—nearly 70%—were in the maturity bucket of one to three years, while about 20% were short-term deposits with less than one-year maturity.
Interestingly, the proportion of deposits offering higher interest rates of 7% and above declined to 65%, from 66.9% in June 2024. This reflects the impact of monetary easing and a shift in banks’ interest rate structures.
The share of large-value term deposits (₹1 crore and above) inched up to 45.7%, compared with 44.8% a year earlier, suggesting stronger participation from institutional investors and wealthy depositors.
Shifting Composition of Deposits
The share of household deposits declined modestly to 59.9% in June 2025, from 60.8% in June 2024. Meanwhile, financial corporations increased their share to 7%, up from 6% last year, indicating rising institutional participation in bank deposits. Senior citizens, who traditionally favor safer fixed deposit products, accounted for 20.4% of total deposits as of June 2025. This underscores their continued role as a stable deposit base for banks, especially amid interest rate transitions.
Public and Private Banks in Deposits
Deposit growth at PSBs stood at 10.2%, while private banks recorded a stronger 12.4% growth in June 2025. In terms of market share, PSBs continued to dominate with 57.3% of deposits, compared with 36% for private banks.
Geographic Concentration
The distribution of deposits remains geographically skewed, with five states and Union Territories—Maharashtra, Delhi, Karnataka, Uttar Pradesh, and Tamil Nadu—together accounting for 54.3% of total deposits and 47.8% of household deposits as of June 2025. This regional concentration underscores the unequal distribution of banking penetration across India.
Outlook
The RBI’s latest data paints a mixed picture. On one hand, credit growth moderation signals a cautious economic environment, particularly in industrial investment. On the other, robust personal loan demand and resilient deposit growth reflect the strength of household balance sheets and consumer confidence.
The easing of lending rates and the dominance of term deposits suggest that banks are recalibrating to a lower interest rate regime. While PSBs continue to spearhead credit expansion, private banks are gaining ground in deposits.
The coming quarters will reveal whether industrial credit can revive alongside economic recovery or if the reliance on retail lending will further deepen, reshaping the contours of India’s banking sector.
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