As per the data on sectoral deployment of bank credit as released by the Reserve Bank of India (RBI), non-food bank credit increased 14.4% in December 2025 over a year ago, showing acceleration in growth compared with 11.1% increase in December 2024. The credit to agriculture accounting for 12.3% of total bank credit, expanded at slower pace of 12.1% in December 2025 from 12.5% growth in December 2024. Meanwhile, the credit growth to the industry accounting for 21.7% of total bank credit, increased 13.3% in December 2025 compared with 7.5% growth in December 2024. Within the industrial segment, the advances to large industry rose 7.5%, while credit to medium industry moved up 20.4% in December 2025. The credit for the micro and small industry increased 31.0% compared with 9.8% growth in December 2024.
Credit growth to the services sector accounting for 27.8% of total bank credit, has moderated to 15.3% in December 2025 compared with an increase of 11.5% in December 2024, driven by improved credit growth for NBFCs at 15.1%, wholesale trade (other than food procurement) 21.9%, other services 16.9%, tourism, hotels and restaurants 20.2% and commercial real estate 15.4%, while credit growth has also eased for computer software to 33.9%, shipping to 47.2%, aviation 10.9% and retail trade 12.6%. However, the services credit growth for professional services moderated to 11.0%, while the credit to transport operators declined -0.9% in December 2025.
Personal loans accounting for 32.7% of total bank credit, increased at accelerated pace of 14.4% in December 2025 as against an increase of 12.0% in December 2024. Among the major segments of personal loans, the credit for loans against gold jewellery accelerated to 127.6%, vehicle loans 16.5% and other personal loans 10.1%, while the credit for consumer durables declined -5.1%. The credit growth has eased for education to 14.8%. Further, the credit growth has eased for advances to individuals against share, bonds, etc. 4.1% and housing moderated to 11.1% while the credit growth for advances against fixed deposits 15.3% and credit card outstanding 1.0% in December 2025 from December 2024.
Priority sector loans accounting for 45.1% of total bank credit, increased at a slower pace of 20.6% in December 2025 compared with a 11.9% growth in December 2024. Among priority sector loans, the credit growth for Agriculture & Allied Activities gained to 14.2% and Weaker Sections 14.5%, while credit to Housing improved to 36.9% and Micro & Small Enterprises 28.5%.
Credit to the industrial sector accounting for 21.7% of the total banking sector credit increased 13.3% in December 2025 compared with a rise of 7.5% in December 2024. As per industry-wise classification, the segments showing accelerated credit growth were infrastructure (7.2% from 1.6%), petroleum, coal & nuclear fuels (39.0% from 6.5%), all engineering (30.4% from 19.3%), gems & jewellery (25.3% from -1.1%) and chemicals & chemical products (14.8% from 7.0%). The credit growth has improved for vehicles, parts & transport equipment (19.0% from 4.5%), textiles (11.8% from 5.6%), mining & quarrying (incl. coal) (20.3% from -1.8%), basic metal & metal product (14.2% from 13.1%), construction (12.2% from 8.3%) and beverage & tobacco (22.1% from 8.4%).
Further, the credit growth has also accelerated for food processing (11.7% from 10.7%), cement & cement products (4.9% from 2.2%), wood & wood products (14.0% from 13.8%) and leather & leather products (7.1% from 5.5%).
On the other hand, the credit growth has moderated for glass & glassware (10.0% from 10.2%), other industries (12.6% from 25.4%), rubber, plastic & their products (9.8% from 12.7%) and paper & paper products (11.8% from 13.2%), end December 2025 over December 2024.
Aggregate deposits growth of the scheduled banks decelerated on sequential basis to 10.6% YoY at Rs 24499894 crore as on 15 January 2026, compared with 12.7% growth a fortnight ago and dipped from 12.1% rise a year ago. The time deposits of the banks moved up 9.3% at Rs 21509103 crore, while the demand deposits increased 20.7% to Rs 2990792 crore as on 15 January 2026.
The banks investment in government and other approved securities that qualify for treatment of statutory liquidity ratio increased 2.7% YoY to Rs 6807467 crore as on 15 January 2026, showing deceleration in growth from 4.4% increase a fortnight ago. The banks investment had moved up 11.0% in January 2025.
The investment-deposit ratio improved on sequential basis to 27.8% as on 15 January 2026 from 27.7% a fortnight ago, while eased from 29.5% in January 2025 with the faster growth in deposits. The investment-deposit ratio is much higher above the Statutory Liquidity Ratio of 18.0%.
Sector expectations
Encouraging deposit inflows: The banking sector has been facing challenges on deposits mobilization leading to increase in credit-deposit ratio. The steps are expected to improve deposit inflows in to the banking sector. Tax incentives such as flat tax is likely on interest income from term deposits as against income tax charged as per the income buckets would benefit term deposits growth.
Tax rationalization on saving account deposits: The banking sector is witnessing pressure on mobilizing low cost saving account and current account deposits. Threshold for saving deposit interest income may be raised to Rs 20000 from Rs 10000. This would provide stability in core deposit base, financial stability, better visibility of system liquidity with growing digital payments. No TDS on saving deposits interest would be positive for saving deposits growth.
Incentivizing credit flow: There is need to improve credit flow to MSMEs, agriculture, and infrastructure sectors and steps such as interest subvention schemes and expanded credit guarantees are expected to be announced. There is also need for arranging supply of long-term funds for the manufacturing sector. There is need for increase in fund allocation to government-backed institutions like SIDBI, NABARD, NHB etc. the government may increase budgetary allocation to expand the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and incentivize banks to cover more MSME loans under this scheme.
Reforms: The Budget may signal future changes for stability in the financial regulatory regime and the development of the stressed assets market. The budget may provide progress on reforms relating to the ECL Framework. There may steps to reduce regulatory differentiation between banks and NBFCs.
Affordable housing finance: The budget may Increase allocation for the Pradhan Mantri Awas Yojana (PMAY). The PMAY-CLSS scheme may be extended along with a revision of price cap for affordable housing.
Microfinance: The microfinance sector is witnessing asset quality stress. The lenders are utlising the insurance cover for their lending through a government-backed credit guarantee framework. The sector may require the support in terms of dedicated funding window to address funding challenges, especially.
PSBs capital infusion: The banking sector does not have major expectation on infusion of any capital infusion from the government in Union Budget 2026-27. The public sector banks have started to raise capital on their own. The public sector bank has improved financial health on the back of reduction in bad loans. The government may announce further measures to facilitate banks to raise capital from market.
Consolidation of public sector banks: The budget may provide more information on progress of consolidation of public sector banks and a roadmap to reduce the government’s stake in public-sector banks. This would help improve the efficiency of public sector banks.
Fiscal consolidation: The focus would be on fiscal consolidation for 2026-27 and any fiscal slippage may cause rise in bond yields leading to increase in borrowing costs. This would also lead banks to incur mark-to-market losses on investment book. The government control on fiscal deficit would help to keep interest rate rise in check.
Key stocks to watch
State Bank of India, Bank of Baroda, Punjab National Bank, ICICI Bank, Axis Bank, HDFC Bank, Federal Bank
Outlook
The banking industry a backbone of economy has continued to report healthy earnings performance supported by a strong asset quality, lower provisions and stable opex ratio. However, the banking sector is facing significant pressure on deposits growth, which may cause pressure on loan growth and net interest margins ahead. The share pf bank deposits in household financial savings have declined to 35.2% in FY2025 from 38.7% in FY2024. The slow deposits growth is major constraint for loan growth, which has exhibited moderation over a year ago level driven. The banking sector would watch for incentives for digitalization, measure to boost liquidity, incentivizing deposits flows to banking sector, roadmap on reduction of government stake in public sector banks and fiscal consolidation in the upcoming Interim Union Budget 2026-27.