Credit Growth Surpasses Deposit Growth in Fortnight

In the latest fortnightly update, bank credit growth continued to outpace deposit growth, although the overall credit offtake was still significantly lower compared to the same period last year. Deposit growth, on the other hand, slipped below the 10% mark for the first time in three months.

As of September 05, 2025, total bank credit stood at ₹188.0 lakh crore, a year-on-year increase of 10.3%, largely driven by lending to MSMEs and a shift in borrowing by large corporates from the bond market to banks, due to higher bond yields. This growth, however, remained well below the 13.4% recorded in the previous year (excluding merger effects), impacted by a high base, weaker corporate lending, and reduced credit flow to NBFCs.

Bank deposits grew 9.8% y-o-y, reaching ₹236.7 lakh crore, lower than the 11.2% growth seen last year. The slowdown was attributed to a preference for alternative investment instruments and government fund release strategies that reduced idle balances. Time deposits grew 8.8% (₹207.8 lakh crore), while demand deposits increased sharply by 17.7% (₹28.9 lakh crore).

The Credit-Deposit (CD) ratio declined to 78.8%, staying under the 80% threshold for more than five months. Meanwhile, the short-term Weighted Average Call Rate (WACR) fell to 5.36%, which is 14 basis points lower than the repo rate of 5.50%, reflecting the RBI’s recent rate cuts and liquidity management measures.

Government investments in total assets dipped slightly, while bank credit’s share of total assets remained unchanged at 72.1%. On the instruments side, outstanding commercial papers (CPs) declined, while certificates of deposit (CDs) issuance and outstanding values recorded sequential increases.