Corporate loan demand outpaces retail credit as firms shift from bonds to banks

Bank credit to industry grew 18 percent year-on-year in the fortnight ended May 31, outpacing 15 percent growth in retail loans, according to RBI data. The shift is driven by a cumulative 125 basis point repo rate cut since February 2025 and rising corporate bond yields, which have made bank loans more attractive, narrowing the gap between five-year MCLR-based bank loans and AA corporate bond yields to near zero. Within industry, loans to micro and small companies grew 26 percent while retail growth was supported by gold loans doubling to about 4.61 lakh crore and housing credit rising 11 percent year-on-year.