Despite optimism about corporate credit picking up in the second half of the financial year, banks remain firmly focused on retail, agriculture, and MSME (RAM) portfolios. This continued bullishness is supported by improving demand conditions, steady rural recovery, and government measures aimed at boosting consumption and small business activity.
“While we were saying 11-12% (credit growth) we have exceeded the 12% based on many enablers which RBI has given and also the fiscal measures in terms of the GST 2.0, we believe that there will be sustained consumption demand which gives an opportunity for us, particularly in the RAM segment,” said CS Setty, Chairman, State Bank of India.
According to data from the Reserve Bank of India, bank credit to agriculture and allied activities rose to Rs 23.61 lakh crore in September — a five-month high — marking a 9% year-on-year increase. Credit to micro, small, and medium enterprises (MSMEs) grew 7.3% year-on-year to `40.80 lakh crore, the fastest pace in six months. Overall, bank credit grew 11.5% year-on-year to Rs 192.1 lakh crore as of the fortnight ending October 17, though it dipped 0.3% from the previous fortnight. The pickup signals renewed momentum in productive sectors, especially rural and small-business clusters.
A CareEdge Ratings report noted that “the growth was primarily driven by seasonal festive demand, the significant impact of GST rate reductions, demand from the retail and MSME sectors, and some corporate demand resulting from rising bond yields. Additionally, robust vehicle financing during the festive period is expected to support overall credit growth further.”
Some lenders are now revising their guidance for the RAM segment’s share in total advances. Bank of Baroda aims to lift RAM’s share to 65% from 61.7%, while Union Bank of India targets 59% from the current 57% as of September 30. Punjab National Bank (PNB) expects a further 1–2% rise in the segment.
“Our sanctioned corporate loan book stands at Rs 1.78 lakh crore (up from Rs 1.36 lakh crore), with 20–45% allocated to project financing. This indicates a pickup of corporate demand, with PNB surpassing its FY24–25 sanctions within six months. While project financing disbursements take 1–2 years, we are confident of achieving our 11–12% credit growth guidance for the financial year and anticipate a very strong corporate loan book in the next 1–2 years,” said Ashok Chandra, MD & CEO, PNB.
The retail segment continues to be a major growth driver, fuelled by housing, personal, and vehicle loans. While banks are exercising caution in unsecured lending after the RBI’s recent supervisory focus, retail credit remains a reliable growth engine.
“Our RAM (retail, agriculture and MSME) book is growing at 17%. I’m sure in the second half also, we would grow around 16%. So, our RAM credit will continue to grow better than the corporate book,” said K Satyanarayana Raju, MD & CEO, Canara Bank.
For the agriculture sector, the upcoming rabi sowing season and continued government focus on rural infrastructure and farm credit are expected to sustain lending momentum. The MSME segment, which had faced challenges from high borrowing costs and uneven demand, is now showing renewed traction.
“We see huge opportunities to grow our retail asset businesses, not only to diversify the portfolio, but also to support our liability franchise. The MSME space is a large opportunity for a bank of our size, and we will grow it as we go forward,” said Rajiv Anand, MD & CEO, IndusInd Bank.
As India enters the busy second half of FY25, banks are betting on a combination of festive spending, improved liquidity, and supportive policy measures to sustain the credit cycle — with RAM portfolios at the heart of their growth strategy.
