Bank credit growth to the industrial sector decelerated to 7.3% in September 2025, reflecting a broader slowdown in lending activity. Personal loans and funding for non-banking financial companies (NBFCs) also witnessed a reduced pace, signaling cautious lending sentiment amid economic uncertainties.
Bank credit growth to industry slows to 7.3% in Sept 2025, with personal loans and NBFC funding also losing pace amid cautious lending sentiment.
India’s bank lending growth to the industrial sector moderated to 7.3% year-on-year in September 2025, underscoring a broader cooling trend in credit expansion. This deceleration comes amid subdued demand and cautious risk appetite among banks, impacting credit flow not only to core industry but also to personal loans and non-banking financial companies (NBFCs).
According to the latest data released by the Reserve Bank of India (RBI) and industry sources, the overall credit growth, while steady compared to recent months, has lost momentum particularly in sectors traditionally reliant on bank financing. The 7.3% growth in industrial credit marked a decline from previous months, reflecting stigma among lenders amid slowing economic activities and inflationary pressures.
Personal loans, which have been a key growth driver for retail banking, also saw a marked deceleration. Analysts attribute this slowdown to tightened credit norms and a cautious stance by banks responding to rising delinquency concerns and economic headwinds. Similarly, bank funding to NBFCs, an important channel for extending credit to various sectors, slowed considerably, partly due to higher perceived risks and regulatory oversight tightening.
Experts suggest that the deceleration in lending growth highlights a shift in the banking sector’s risk assessment framework, after a period of aggressive loan book expansion. The change is also influenced by global and domestic factors such as interest rate fluctuations, inflation, and geopolitical uncertainties that have affected borrowers’ creditworthiness.
Industry insiders note that while the moderation in credit growth could temper immediate financial system risks, it also raises concerns over the potential impact on economic recovery prospects. The industrial sector, being a significant contributor to GDP and employment, depends substantially on bank finance for capital expenditures and working capital.
Data points to a gradual tightening of credit flows in capital-intensive industries such as manufacturing, infrastructure, and real estate. Amid this trend, banks are reportedly prioritizing sectors with lower perceived risks and stronger balance sheets, opting for risk-averse strategies to mitigate non-performing assets (NPAs).
In the personal loan segment, anecdotal evidence suggests that while demand remains robust, supply is being recalibrated with higher scrutiny, resulting in slower growth rates. The lending slowdown to NBFCs comes at a time when these entities are increasingly important players in retail and wholesale credit markets, and constrained funding could have broader implications.
RBI officials have indicated close monitoring of credit trends and stressed the importance of maintaining equilibrium between credit growth and asset quality. Policies aimed at supporting targeted sectors may evolve as part of the monetary and regulatory toolkit to encourage prudent lending practices while avoiding over-tightening.
In summary, the September 2025 data signals a cautious stance among banks on credit allocation, reflecting adjustments to evolving economic realities and risk considerations. While the slowdown in credit growth to industry, personal loans, and NBFCs tempers immediate pressures on the banking system, it also underscores the need for balanced measures to sustain economic momentum.
