Bank credit growth remained resilient close to the 12% mark on a year-on-year basis, even as short-term momentum softened in the latest fortnight ended December 15, data released by Reserve Bank of India showed. Outstanding bank credit stood at Rs 196.95 lakh crore, registering 11.98% on year growth, underlining sustained lending momentum through November. On a fortnightly basis, however, credit growth moderated to 0.85%, reflecting typical volatility in incremental flows during the period.
Deposit Lag and the Rising CD Ratio
Deposit growth, meanwhile, continued to trail credit expansion. Total deposits rose 9.35% year-on-year to Rs 241.32 lakh crore but declined 0.53% over the previous fortnight. “Credit and deposit growth can fluctuate on a fortnightly basis, influenced by demand patterns and inflows or outflows within the banking system on specific dates,” said Sachin Sachdeva, vice president and sector head – financial sector ratings at ICRA. He added that seasonal factors, including variations in cash requirements and tax outflows, often impact such data points.
Sachdeva noted that while FY2026 began with subdued credit offtake, lending momentum picked up sharply by the end of the first half of the year and remained strong through November, aided by declining interest rates, GST rationalisation and festive demand. However, deposit growth has lagged credit expansion in recent months, resulting in a rise in the system-wide credit–deposit (CD) ratio.
Future Outlook
Looking ahead, Sachdeva said the RBI’s liquidity-enhancing measures—such as open market operations, forex swaps, cash reserve ratio (CRR) reductions and the planned relaxation of liquidity coverage ratio (LCR) norms from April 2026—are expected to support credit growth. These steps could also encourage banks to lower high-quality liquid assets and prioritise lending, keeping CD ratios structurally elevated.
ICRA expects credit growth to remain robust in the medium term, driven largely by retail and MSME segments, with private sector banks likely to refocus on growth after earlier moderating their CD ratios. “ICRA retains its credit growth estimate for FY2026 at Rs. 19.5–21.0 trillion (10.7–11.5%) and projects credit expansion of Rs. 23.5–25.0 trillion (11.7–12.3%) in FY2027,” he said.