Bank Credit and Deposit Growth Gap Widens
- Credit growth
- Bank credit in India grew 11.1% year-on-year (YoY) in the fortnight ended March 7, 2025.
- Absolute credit growth was ₹1.38 trillion over the previous fortnight.
- Outstanding credit reached ₹225.10 trillion.
- Deposit growth
- Deposits grew by 10.2% YoY in the same period.
- Deposits increased by ₹2.25 trillion in the fortnight.
- Outstanding deposits stood at ₹181.28 trillion.
- Credit-deposit gap
- The gap between credit and deposit growth widened to around 90 basis points (bps).
- Tight liquidity and pressure on deposit mobilisation are key reasons for this widening gap.
- Liquidity situation
- Net liquidity deficit in the banking system stood at ₹2.32 trillion.
- This marked the 14th consecutive week of liquidity deficit.
- Banking behavior
- RBI measures and policy actions
- RBI has deferred changes to the liquidity coverage ratio (LCR) framework.
- RBI rolled back increased risk weights on NBFC exposures.
- Rationalisation of risk weights on microfinance loans has been announced.
- Future rate cuts by RBI could help boost credit growth by lowering borrowing costs.
- Forecasts and expert views
- ICRA has revised credit growth estimates upwards:
- FY25: 10.8% to 11.5%.
- FY26: 10.4% to 11.2%.
- Saurabh Bhalerao from CareEdge expects:
- FY25 credit growth at around 11.2%.
- Deposit growth at approximately 10.5%.
- Limited room for aggressive lending due to tight liquidity.
- Overall outlook
- Credit growth could improve with policy support and rate cuts.
- However, the liquidity deficit and challenges in deposit mobilisation remain significant constraints.
- The gap between credit and deposit growth may continue in the near term.
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