Bank credit slows, inflation cools even as war clouds loom over global markets: Capitalmind study
According to the report, loans to agriculture, industry, and services have all declined, with overall credit growth to industry falling from 8% to 6.7%.
- Jun 24, 2025,
- Updated Jun 24, 2025 2:50 PM IST
India’s war with Pakistan following the Pahalgam terror attacks and Israel’s offensive against Iran have destabilised the geopolitical landscape, but Indian markets remain composed. Nifty posted its third straight month of gains, even as inflation dropped to a six-year low of 2.82% in May. However, the Capitalmind Flipbook for June 2025 notes a deeper concern: a visible slowdown in bank credit growth.
According to the report, loans to agriculture, industry, and services have all declined, with overall credit growth to industry falling from 8% to 6.7%. Personal loans have shown a slight uptick, but growth in unsecured credit has slumped to single digits following the Reserve Bank of India’s (RBI) intervention last year. Credit card growth has plateaued at 10.6%, while priority sector housing loans remain muted at below 1% growth.
Despite these credit concerns, inflation has come firmly under control. “Inflation for May 2025 came in at just 2.82%—the lowest reading since 2019,” the Flipbook highlights. A combination of easing commodity costs, softening demand, and disciplined fiscal spending has anchored inflation expectations. While gold surged past $3,400 per troy ounce and crude oil rallied toward $75 due to ongoing conflict in the Middle East, India’s inflation trajectory remains contained.
Against this backdrop, the RBI took an unusually aggressive stance—cutting the repo rate by 50 basis points to 5.5%, along with a CRR cut to 3%. “Historically, such sharp moves are reserved for crises. But with inflation cooling and credit stagnating, the RBI is clearly targeting a revival in growth,” the Flipbook states. The central bank now hopes to steer economic growth closer to the 8% mark, even as the trailing 12-month GDP growth stands at 6.5%.
Some green shoots are emerging. Loans to computer software companies and against gold have outpaced other segments, indicating selective credit demand. However, loans to consumer goods companies have contracted in four of the last five months—underscoring weak private consumption.
“Credit for consumer goods has in fact seen degrowth in 4 out of the last 5 months,” the report adds. “Growth has fallen slightly from 15.3% to 14.7%. Growth in priority sector housing remains below 1%.” Despite recent repo rate cuts, these indicators suggest a cautious lending environment.
India’s war with Pakistan following the Pahalgam terror attacks and Israel’s offensive against Iran have destabilised the geopolitical landscape, but Indian markets remain composed. Nifty posted its third straight month of gains, even as inflation dropped to a six-year low of 2.82% in May. However, the Capitalmind Flipbook for June 2025 notes a deeper concern: a visible slowdown in bank credit growth.
According to the report, loans to agriculture, industry, and services have all declined, with overall credit growth to industry falling from 8% to 6.7%. Personal loans have shown a slight uptick, but growth in unsecured credit has slumped to single digits following the Reserve Bank of India’s (RBI) intervention last year. Credit card growth has plateaued at 10.6%, while priority sector housing loans remain muted at below 1% growth.
Despite these credit concerns, inflation has come firmly under control. “Inflation for May 2025 came in at just 2.82%—the lowest reading since 2019,” the Flipbook highlights. A combination of easing commodity costs, softening demand, and disciplined fiscal spending has anchored inflation expectations. While gold surged past $3,400 per troy ounce and crude oil rallied toward $75 due to ongoing conflict in the Middle East, India’s inflation trajectory remains contained.
Against this backdrop, the RBI took an unusually aggressive stance—cutting the repo rate by 50 basis points to 5.5%, along with a CRR cut to 3%. “Historically, such sharp moves are reserved for crises. But with inflation cooling and credit stagnating, the RBI is clearly targeting a revival in growth,” the Flipbook states. The central bank now hopes to steer economic growth closer to the 8% mark, even as the trailing 12-month GDP growth stands at 6.5%.
Some green shoots are emerging. Loans to computer software companies and against gold have outpaced other segments, indicating selective credit demand. However, loans to consumer goods companies have contracted in four of the last five months—underscoring weak private consumption.
“Credit for consumer goods has in fact seen degrowth in 4 out of the last 5 months,” the report adds. “Growth has fallen slightly from 15.3% to 14.7%. Growth in priority sector housing remains below 1%.” Despite recent repo rate cuts, these indicators suggest a cautious lending environment.