Banks remain cautious on corporate credit growth as the private sector has moved to a wait-and-watch mode on greenfield investments amid global uncertainties surrounding tariffs and geopolitical conflicts.

RBI’s data on deployment of gross bank credit shows that as of February 2025, credit flow to industries has seen a 7.1 per cent year-on-year growth. This is lower than the 9.3 per cent seen in February 2024. A closer look at the RBI data shows that industries such as food processing, fertiliser, cement, telecommunications and ports have seen a year-on-year decrease in credit growth, while sectors such as petroleum, engineering, electronics and airports have seen healthy year-on-year growth.

SBI chairman C.S. Setty on Saturday said the bank has seen a moderation in the pace of growth of corporate credit, but it cannot be linked only to tariff-related uncertainties.

“A lot of prepayments and early payments have happened in the corporate books either because of deleveraging or because of some equity raising that has happened at the company level,” he said following the fourth quarter earnings of the bank.

“Everybody is watching what will unfold in the global environment. New investment announcements may not come immediately. But whatever commitments are there, we are seeing nobody is going back on that,” he added.

“We acknowledge that the global macroeconomic outlook has become more uncertain due to the recent trade tariff-related measures and the volatility surrounding them. This may potentially impact global inflation, leading to lower growth across economies. Corporate houses have adopted a wait-and-watch stance, and we are waiting for more clarity. We remain watchful,” said Sashidhar Jagdishan, MD and CEO, HDFC Bank, at the Q4 earnings call of the bank.

Demand deceleration

Data compiled by CMIE from 315 listed companies indicate that the corporate sector has seen a slowdown in business for the quarter ended March 31, 2025. Total income has grown 3.3 per cent during the quarter. With consumer inflation at 3.7 per cent and wholesale inflation at 2.3 per cent during the period, the topline has struggled to grow in real terms even as the profitability has remained stable, indicating cost optimisation.

While the sample of 315 companies account for around 7 per cent of the nearly 4,500 listed companies that release their financial statement every quarter, the CMIE analysis noted that they account for 37.7 per cent of the total sales and 46.1 per cent of the net profit of all listed companies as of the March quarter of 2024, making it a reasonable indicator of the quarterly financial performance.

However, there are prospects of domestic demand improving with forecasts of above-normal monsoon and easing of interest rates, which in turn could lead to more revenue, capital expenditure and better corporate credit growth.