MUMBAI: Outstanding bank credit in India climbed to ₹220.78 trillion by July 31, growing 19.3 percent from a year earlier, while deposits rose to ₹269.41 trillion, according to Reserve Bank of India data.
Both sides of the banking system picked up pace within the same fortnight. Credit growth stood at 17.7 percent on July 15, with deposits growing 12.7 percent; by month-end, those figures had climbed to 19.3 percent and 15.4 percent respectively.
In absolute terms, outstanding loans rose by about ₹3.45 trillion over the fortnight, taking credit from ₹217.33 trillion to ₹220.78 trillion, while deposits grew by roughly ₹6.60 trillion, from ₹262.81 trillion to ₹269.41 trillion.
The deposit acceleration stands out particularly, since Indian banks had spent recent months navigating a weaker deposit environment even as loan demand kept expanding. At 15.4 percent, deposit growth hit its highest mark since December 2016, a jump partly fuelled by large foreign-currency inflows through the RBI’s special FCNR(B) deposit facility.
Banks had mobilised about $36.7 billion through that facility by July 31; by August 13, the figure had jumped to $52.3 billion, prompting the RBI to move the facility’s closing date up to August 31 from its original September 30 deadline.
The deposit surge wasn’t limited to foreign-currency inflows either. Time deposits accounted for the bulk of the fortnightly rise, with demand deposits climbing too, a meaningful detail since ordinary rupee deposits remain the core funding base for banks’ domestic lending. Credit demand has been spreading across sectors rather than concentrating in one segment.
May data showed industry lending growing 17.5 percent year-on-year, services credit up 20.4 percent, retail lending rising 15.4 percent, and agricultural credit expanding 14.9 percent. That broad-based pickup has carried through the start of the current financial year, with bank credit up around ₹7.18 trillion in FY2026-27 so far, well ahead of the ₹2.57 trillion recorded over the same period last year.
Corporate borrowers have added to that momentum too, turning to banks as higher yields in parts of the corporate debt market made bank borrowing comparatively more attractive, particularly for infrastructure and other capital-heavy financing needs.The credit-deposit gap remains worth watching closely.
At the end of July, credit growth was running 3.9 percentage points ahead of deposit growth, narrower than the 5-point gap seen mid-fortnight, but still a meaningful spread. Banks can bridge faster loan growth through various funding channels in the short term, but sustained lending expansion ultimately depends on a dependable deposit base, and competition for deposits directly affects funding costs and, in turn, lending margins.
The RBI’s special FCNR(B) arrangement added a temporary funding channel to the system, letting eligible banks access swaps against fresh FCNR(B) deposits to manage the currency risk those deposits carry.
That window is now closing earlier than planned, having pulled in more than $52 billion, part of a broader RBI foreign-exchange operation that mobilised additional funds through other channels as well.
