After months of decline, India’s credit growth has started to rebound. According to a report by Anand Rathi Research, credit growth rose to 11.4% in January 2025, up from 11.2% in December 2024. This uptick suggests a revival in lending activity and economic momentum.
The report highlighted, “After being on a downtrend since April 2024, credit growth has started to rebound, expanding at 11.4 per cent in January 2025.”
Deposit Growth and Government Investments Strengthen
A similar pattern emerged in deposit growth. Deposits increased to 10.3% in January 2025, reversing the dip seen in December. The rise was mainly due to higher demand deposits, which expanded to 6.6%, along with a steady increase in time deposits.
Meanwhile, banks have consistently invested in government securities (G-Secs) since September 2024. The latest data shows an 11.1% rise in these investments, aligning with RBI’s July 2024 mandate to increase high-quality liquid assets (HQLA).
Industrial and Infrastructure Credit See Mixed Trends
Credit to the industrial sector remained steady at 11.7% in January 2025. However, the infrastructure sector showed a slight recovery, growing by 1.6% after reaching a 14-month low in December 2024. This improvement hints at a possible revival in long-term infrastructure financing.
Services Sector Leads Credit Growth
The services sector saw significant credit expansion, reaching 12.5% YoY. This growth was driven by:
- Wholesale trade, which surged by 18.1%
- Real estate, which expanded 13.9% due to sustained housing demand
However, the aviation sector continued to struggle, with minimal credit growth of 0.9% YoY.
Mixed Trends in Personal Loans
Personal loan growth slowed to 11.8% YoY, mainly due to lower demand for credit card and education loans. On the other hand, vehicle loans picked up pace, rising 9.7% YoY, fueled by higher passenger vehicle sales. Housing loans remained steady at 11% YoY, reflecting ongoing interest in home purchases.
Future Outlook
The RBI’s decision to lower risk weights for lending to NBFCs from April 2025 is expected to further support credit growth. With lending activity strengthening, India’s banking sector appears to be on the path to recovery. However, challenges persist in sectors like aviation and education loans, where credit demand remains weak.