The bank credit has registered a modest improvement in June 2025, driven by an uptick in credit to micro, small and medium enterprises, according to the Reserve Bank of India’s (RBI) August Bulletin.
However, large corporates shy away from bank credit and rely more on the market-based instruments such as commercial paper and corporate bonds for funding amid faster monetary policy transmission to money markets.
“With faster monetary policy transmission to money markets, large corporates have increasingly turned to market-based instruments such as commercial paper and corporate bonds for funding, thereby reducing the demand for bank credit,” bulletin said.
India’s bank credit growth rose to 10.22 percent year-on-year in the fortnight ended August 8, the highest in more than three months. Though the rise in demand is a positive sign, data suggests a full recovery is still some distance away.
According to Reserve Bank of India (RBI) data, average credit growth, so far, in FY26 (April–August) stands at 9.94 percent, significantly lower than the 13.94 percent average registered in FY25. The gap shows that while credit expansion is improving, the pace lacks previous year’s robust growth trajectory.
Indian banks are eyeing a revival in credit demand in the second half of the current financial year (H2FY26), with bankers projecting growth in the range of 10–12 percent, supported largely by the upcoming festive season beginning September. However, lenders caution that lingering US tariff uncertainties and trade tensions could pose challenges to sustaining momentum, bankers told Moneycontrol.
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