Key facts
- India's bank credit growth accelerated to 17.7% year-on-year in the fortnight ended May 31, 2026.
- This marks the strongest growth in FY27 and the highest rate since June 2024.
- Rising crude prices and government support schemes contributed to increased credit demand.
- Bank deposits fell by Rs 2.3 lakh crore in the first two months of FY27.
- The credit-deposit ratio remained above 80%, indicating pressure on banks to fund loan demand.
India's bank credit growth accelerated to its fastest pace in nearly two years, reaching 17.7% year-on-year in the fortnight ended May 31, 2026. This surge marks the strongest growth recorded so far in fiscal year 2027 and the highest since June 2024.
Bankers attribute the increased credit demand partly to oil marketing companies facing lower realisations following a recent surge in crude oil prices. Additionally, government support through the emergency credit line guarantee scheme has contributed to higher credit offtake.
Outstanding bank credit increased by Rs 1.5 lakh crore between March 31 and May 31, 2026, representing a 0.7% rise in the first two months of the fiscal year. Total outstanding credit reached Rs 215.2 lakh crore by the end of May.
In contrast to credit expansion, aggregate bank deposits fell by Rs 2.3 lakh crore, or 0.9%, from March-end levels, bringing the total deposit base to Rs 260 lakh crore as of May 31. Deposit growth lagged credit expansion, standing at 12.2% as of May 31, more than five percentage points slower than credit growth.
The widening gap between credit and deposit growth has kept the banking system's credit-deposit ratio above 80% since October 2025, reaching 82.8% in May 2026. This indicates continued pressure on banks to fund robust loan demand amid weaker deposit mobilization.
To manage liquidity and support lending, banks have adjusted their balance sheets by slowing investments in government securities. Growth in these holdings dropped to around 2% in January 2026 before recovering modestly to 4.9% by May-end.