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The pace of credit growth among Scheduled Commercial Banks (SCBs) has decelerated significantly, according to a recent report by the State Bank of India (SBI). As of 13 June 2025, overall credit growth stood at 9.6 per cent, almost halving from 19.1 per cent recorded during the same period last year.

The moderation in growth is being linked to a combination of subdued lending activity and challenging base effects, the SBI report noted. When adjusted for the merger of HDFC Ltd with HDFC Bank, which took effect on 13 July 2023, the underlying credit growth shows a marginally improved figure of 10.6 per cent, compared to 15.5 per cent a year earlier.

“SCBs credit growth moderated to 9.6 per cent, as on 13 June 2025 (19.1 per cent a year ago),” the report stated.

Year-To-Date Credit Expansion Slows

Data shows that the year-to-date (YTD) increase in total credit amounted to Rs 70,005 crore, equivalent to 0.4 per cent growth. This is a significant drop from Rs 2.74 lakh crore (1.7 per cent YTD) witnessed during the same period last year. After three years of strong lending momentum from FY21 to FY24, the pace of growth started slowing from mid-2024 and settled at 11.1 per cent in FY25.

Private Banks Lose Steam

The report underscores a notable shift in bank-group performance. While Public Sector Banks (PSBs) maintained consistent growth, private sector lenders witnessed a marked deceleration.

“The bank-group wise contribution to SCB growth indicates that private banks' growth slowed down significantly compared to PSBs,” the report stated.

In FY25, PSBs posted a credit growth of 12.2 per cent, down only slightly from 13.6 per cent in FY24. In contrast, private banks saw growth fall to 9.5 per cent, its lowest since FY21.

MSMEs And Industrial Credit Show Uptick

Another trend highlighted in the report is the evolving sectoral credit allocation. Lending to the industrial segment increased, with its share in incremental credit rising to 17 per cent in FY25, up from 11 per cent the previous year.

A particularly positive development was observed in the MSME segment, which recorded a 17.8 per cent year-on-year growth in credit. SBI attributes this to stronger balance sheets and fewer defaults. Multiple factors have contributed to this improvement, including formalization through UDYAM registration, expanded government guarantee schemes, revised MSME definitions, and lower turnover thresholds for mandatory registration on the TReDS platform.