Bank lending growth halves in February amid retail and NBFC slowdown

Retail loans rose 14 percent (y-o-y) during the fortnight ended February 21 as compared with 18 per cent a year ago, largely due to decline in growth rate in ‘ unsecured personal loans’, ‘credit card outstanding’ and ‘vehicle loans.

Credit to services sector went up by 13 percent (y-o-y) in the February 21 fortnight (21.4 per cent for the corresponding fortnight of the previous year), with a decelerated growth in credit to ‘non-banking financial companies’ (NBFCs). However, credit growth (y-o-y) to ‘computer software’ accelerated. Credit growth remained robust in ‘professional services’ and ‘trade’ segments, the RBI data showed. .Credit to industry recorded a growth of 7.3 percent (y-o-y) in the fortnight ended February 21 compared with 8.4 percent for the corresponding fortnight of the previous year. Among major industries, outstanding credit to ‘petroleum, coal products and nuclear fuels’, ‘all engineering’, ‘construction’, and ‘paper & paper products’ recorded an accelerated y-o-y growth, RBI said.

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If one excludes the merger impact of HDFC with HDFC Bank, on a year-on-year (y-o-y) basis, non-food bank credit as on the fortnight ended February 21, 20253 grew at 12.0 per cent as compared to 16.6 per cent for the corresponding fortnight of the previous year.

As of March 07, 2025, credit offtake reached Rs 181.3 lakh crore, marking an 11.1% year-on-year (y o-y) increase, slower than last year’s rate of 12.1% (excluding merger impact). This slowdown can be attributed to a higher base effect, alongside measures implemented by RBI, as well as market concerns regarding elevated credit-to-deposit ratio, according to Caredfe Ratings.

Data on sectoral deployment of bank credit for the month of February 20251 collected from 41 select scheduled commercial banks, accounting for about 95 per cent of the total non-food credit deployed by all scheduled commercial banks.