Reserve Bank of India governor Sanjay Malhotra on Monday urged lenders to step up credit flow and give momentum to private investment, which in turn will aid economic growth.
“On the demand side, I urge the industry to invest boldly and champion the entrepreneurial spirit that defines our nation. At a time when the balance sheets of banks and corporates are at their best, they should come together and drive animal spirits to create an investment cycle which is so important at this juncture,” Malhotra said at an annual conference organised by Ficci and IBA (Indian Banks’ Association) in Mumbai.
The RBI governor’s observation comes at a time when bank credit growth has seen a significant decline from 20.2 per cent in March 2024 to 9.5 per cent in June 2025 despite a reduction in interest rates by the central bank during this period. There has been a slight recovery in the fortnight ending July 25, 2025, with credit growth reaching 10 per cent.
“This slowdown reflects a combination of softer momentum and the impact of a higher base. It is partly driven by slower growth in lending to corporates and unsecured personal loans, although retail credit continues to register some growth.
“On the corporate side, capital expenditure remains muted amid uncertainty over tariffs, while large corporates are tapping alternative options (including capital market), contributing to a moderation in loan demand,” CareEdge Ratings said in a report.
Malhotra said that the central bank is examining measures to enhance bank credit “towards productive sectors” without elaborating on the precise moves that are being planned.
A recovery in credit demand and private investment will also boost economic growth. According to analysis by the Centre for Monitoring of Indian Economy (CMIE), real gross value added is expected to have grown by 6.3 per cent in the June 2025 quarter, on a year-on-year basis, which is slower than the 6.6 per cent in the June 2024 quarter. The slowdown is primarily on account of stifled industrial sector growth, even as agriculture is likely to keep the overall growth buoyant in the quarter.
CMIE estimates GDP growth between 6.5 per cent and 6.7 per cent for the June 2025 quarter, in line with the 6.5 per cent estimate of the RBI. Economists at SBI, however, expect a growth of 6.8-7 per cent.
Growth focus
The RBI governor said that the central bank has not lost sight of growth even as the primary objective of monetary policy has been price stability.
“The primary objective of monetary policy in terms of price stability has significantly contributed to the strength of India’s macroeconomic fundamentals.
At the same time, the Reserve Bank has not lost sight of the objective of growth. For example, before Covid, when growth was slowing, and in recent months, when inflation was benign and growth needed to be supported, the Monetary Policy Committee reduced the policy repo rate.
“We will continue to conduct monetary policy with the primary objective of price stability, keeping in view the objective of growth,” Malhotra said.
Ombudsman review
The RBI governor also said that the central bank is in the process of reviewing the Ombudsman framework to strengthen grievance redressal amid the rising number of grievances escalating to the RBI Ombudsman.
“We are in the process of reviewing the Internal Ombudsman framework at the level of regulated entities to further strengthen it and ensure that complaints get resolved effectively within the institution itself.
“We have had discussions with IBA in this regard and will be issuing a draft for consultation,” Malhotra said.
“We are also reviewing the RBI Integrated Ombudsman System to enhance its effectiveness, transparency and customer centricity,” Malhotra said.