The banking system ended FY26 on a strong note, with both credit and deposit growth touching two-year highs.
The deposit growth came in at 13.47%, the fastest pace since May 2024, as households and institutions moved money into safer avenues after a turbulent spell in financial markets. A sharp correction in equities, volatility in gold and silver, and losses in several mutual fund categories pushed investors towards the relative stability of bank deposits and bonds. This flight to safety lifted system liquidity and pushed absolute deposits to an all-time high, rising to Rs 262 lakh crore as on March 31, 2026.
Equity Exodus
Credit growth, too, accelerated to 16.08% (Rs 213 lakh crore), its strongest since June 2024, driven by a decisive shift in borrowing patterns. With yields rising and the rupee’s depreciation making overseas borrowing more expensive, large corporates slowed or postponed their capital-market issuances — both domestic and offshore — and turned to banks instead. The shift was reinforced by strong traction in retail segments, particularly gold loans and vehicle loans, which remained active throughout the year.
Shifting Corporate Debt
Even though some of the early GST-linked enthusiasm in auto loans tapered off by March, year-end numbers remained significantly higher than the previous year. The credit–deposit (CD) ratio eased to 81.44, down from a recent fortnight’s peak of 83.04, largely because the deposit growth outpaced credit expansion in the final fortnight.
Sanjay Agarwal, senior director at CareEdge Ratings, said: “The twin surge is a direct outcome of market dynamics. Higher capital-market rates and currency pressures have pushed borrowers towards banks, while market corrections have driven investors into deposits, creating a rare moment where both credit and deposit growth are simultaneously elevated.”
He believes that while the deposit growth may moderate once markets stabilise, the momentum remains stronger than in previous years. However, credit demand, closely tied to capital-market conditions, is expected to stay healthy, setting the stage for another year of steady expansion of the banking sector.