Bank Credit Growth Jumps to 14.6% in January 31 Fortnight, Deposits Stay Strong: RBI
Credit rebounds after early January slowdown as wholesale demand and rate cuts lift lending momentum; deposits grow 12.5% year-on-year.
India’s banking system regained pace in the fortnight ended January 31, with bank credit expanding 14.6% year-on-year, up from 13.1% in mid-January, according to RBI data. Deposit growth remained firm at 12.5% Y-o-Y, signaling stable funding even as lending accelerates.
The turnaround marks a sharp recovery from the first fortnight of 2026, when both credit and deposits had contracted sequentially.
Credit and Deposits: The Numbers Behind the Rebound
As of January 31:
- Total bank credit stood at ₹204.75 trillion
- Total deposits reached ₹248.81 trillion
During the fortnight:
- Credit expanded by ₹3.41 trillion (1.7%)
- Deposits rose by ₹3.82 trillion (1.6%)
Compare that to January 15:
- Credit had slowed to 13.1% Y-o-Y and contracted ₹1.88 trillion
- Deposits grew 10.6% Y-o-Y but fell ₹3.57 trillion sequentially
By contrast, in the last fortnight of December 2025, credit grew 14.5% and deposits 12.7% year-on-year. The January-end print effectively restores that trajectory.
Is this a temporary bounce—or the start of a stronger FY26 credit cycle?
What’s Driving the Credit Pick-Up?
Three factors appear to be lifting momentum:
- GST rationalisation across products and services
- RBI rate cuts, improving borrowing conditions
- Rising wholesale credit demand
Wholesale borrowing gained traction as corporate bond yields remained elevated, narrowing the spread between market borrowing and bank loans. Faster transmission of lending rate cuts further reduced that differential.
In plain terms, bank loans are becoming relatively more attractive again—especially for corporates weighing bond issuance.
FY26 Outlook: Momentum Building Toward Year-End
Credit growth is expected to gather steam toward the business end of FY26.
The country’s largest lender, State Bank of India (SBI), recently revised its FY26 credit growth guidance upward to 13–15%, from 12–14%.
SBI expects:
- Corporate credit to sustain double-digit growth
- The Retail, Agriculture, and MSME (RAM) segment to remain the primary driver
- MSME lending to benefit from improving trade sentiment and better data availability
Chairman CS Setty highlighted the positive spillover from recent trade deals with the EU, Oman, New Zealand, and the US, noting expanded market diversification opportunities for Indian companies.
“I see many areas where SBI is well positioned to take advantage of the emerging scenario,” Setty said, adding that both corporates and a large base of MSMEs stand to benefit.
If trade flows deepen and credit costs remain supportive, banks could find themselves at the front edge of India’s next investment push.
The Bigger Picture
At ₹204.75 trillion in credit and ₹248.81 trillion in deposits, the banking system shows resilience despite early-year volatility. The narrowing gap between credit and deposit growth also signals healthier liquidity dynamics compared to periods of aggressive loan expansion.
For lenders, the balancing act now centers on sustaining growth without stretching funding costs. For borrowers, the window of relatively favorable rates may not stay open indefinitely.
Will FY26 deliver a full-fledged credit upswing—or just measured acceleration?
TL;DR:
Bank credit grew 14.6% Y-o-Y in the fortnight ended January 31, rebounding from early January weakness, RBI data show. Deposits rose 12.5%. Credit expanded ₹3.41 trillion and deposits ₹3.82 trillion sequentially. SBI raised FY26 credit growth guidance to 13–15%, citing strong corporate and MSME demand.
AI summary:
- Credit growth rises to 14.6% Y-o-Y
- Deposits grow 12.5% Y-o-Y
- Credit at ₹204.75 tn; deposits ₹248.81 tn
- SBI lifts FY26 growth guidance to 13–15%
- Corporate and MSME demand driving momentum
