India’s private investment landscape remains cautious, with companies holding back amid the turbulence of US trade policy. Aditi Gupta, economist at Bank of Baroda, attributes the current moderation in credit offtake to global headwinds. In her report, Gupta highlights that protectionist rhetoric and unpredictable trade rules from the US have infused hesitation into corporate investment decisions. This caution has echoed across India’s banking data. Scheduled Commercial Banks (SCBs) reported credit growth of 9.5% by June 27, 2025, much lower than the 17.4% clocked in the same period last year. Even the credit/deposit ratio has slipped slightly to 78.9%, down from 79.3%. Slower credit uptake reflects broad-based softness, including in key segments like agriculture, which dipped to 9.8% from last year’s 19.8%. While the base effect explains part of the decline, uncertainty remains a key culprit. The investment engine has stalled, but not shut off.
Credit Trends Snapshot (2024 vs 2025)
| Segment | June 2024 (%) | June 2025 (%) |
|---|---|---|
| Overall Credit Growth | 17.4% | 9.5% |
| Agriculture Credit | 19.8% | 9.8% |
| Credit/Deposit Ratio | 79.3% | 78.9% |
Credit Across Sectors Feels The Chill
The year 2025-26 has delivered an across-the-board moderation in credit growth. Credit to agriculture dropped sharply from 19.8% to 9.8%, revealing stress in rural demand. Aditi Gupta noted that this decline partly stems from last year’s unusually high base, but the hesitation to borrow is visible across industries. Notably, credit growth has lagged behind deposit growth—reversing last year’s trend where credit was booming. With lending softer than savings, banks find themselves in a liquidity-rich but cautious lending environment. This widespread slowdown suggests businesses are waiting for clearer global signals, and perhaps, a little more domestic cheer. But wait—it’s not all gloomy. The climate may be ripe for a comeback.
Credit Revival On The Horizon
Aditi Gupta expects credit to rebound, driven by domestic tailwinds. “Private investment should also see a pickup as uncertainty over US policies recede,” she said. Her optimism leans on better monsoon forecasts, resilient services, and capital expenditure pushes by the government. Retail credit may also rise as festive demand kicks in, borrowing costs dip, and liquidity stays abundant. “Ample liquidity along with a supportive regulatory framework and lower interest costs are likely to spur a pickup in credit offtake in the coming months,” she added. Gupta also pointed to healthy reservoir levels and promising kharif sowing, both likely to inject confidence into the rural economy. With these factors in play, banks might just start writing bigger credit stories again.
(With Inputs From ANI)
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