Banks' loan offtake gains pace at end of first quarter, shows data

Bank credit growth slowed further to 9.5% YoY in the fortnight ending June 27, with deposits growing at 10.1%, outpacing credit growth, data showed.

Banks’ credit offtake gained momentum in fag end of the first quarter (Apr-Jun) which rose by ₹1.69 trillion during the fortnight ended June 27,  — highest in any fortnight of the current financial year, latest data released by the Reserve of India shows. Deposits grew by ₹3.55 trillion during this same period. 

The central bank has cut the policy repo rate by 100 bps between February and June while keeping surplus liquidity in the banking system which has aided loan off take. 

However, the pace of bank credit growth on a year-on-year (Y-o-Y) basis continued to be in single digit, at 9.5 per cent — a sharp drop from over 17 per cent during the same period last year. Deposit growth stood at 10.1 per cent Y-o-Y, outpacing credit. 

So far in FY26, incremental credit stands at ₹2.39 trillion, while incremental deposits have risen by ₹8.45 trillion, the data showed.

In the previous fortnight (ended June 13), credit growth inched up to 9.6 per cent Y-o-Y while deposits grew at 10.4 per cent Y-o-Y. Credit growth had touched a three-year low of 8.97 per cent Y-o-Y in the fortnight ended May 30 while deposits grew at 9.9 per cent Y-o-Y. The last time credit growth was below 9 per cent was back in March 2022. 

In FY25, credit growth was 11 per cent Y-o-Y, a sharp reduction from 20 per cent Y-o-Y growth in FY24.  The Q1FY26 business updates by private banks paint a grim picture as far as credit growth is concerned.

 

The country’s largest private sector lender HDFC Bank reported a 6.7 per cent Y-o-Y growth in advances while its deposits grew over 16 per cent during the same period. Yes Bank reported only 5 per cent Y-o-Y growth in advances in Q1FY26. Among large private banks, Kotak Mahindra Bank reported a 14 per cent Y-o-Y growth in advances. Meanwhile, among large state-owned banks, Bank of Baroda’s (BoB) advances grew 12.45 per cent Y-o-Y in Q1FY26; while Punjab National Bank’s advances grew 9.7 per cent Y-o-Y. 

The state-owned banks have been nudged by the finance ministry to step up lending activities in a recent meeting. 

“While April and May are typically weak months for credit growth, June has also remained subdued this year. A significant part of the slowdown is due to a marked decline in lending to NBFCs. Additionally, retail credit has also decelerated. On the corporate side, capex activity remains muted amid uncertainties around the tariff situation, leading to subdued loan demand. We currently estimate loan growth at 11.5–12.5 per cent year-on-year in FY26”, said Saurabh Bhalerao, associate director and head — BFSI Research, CareEdge. 

With loan offtake showing early signs of pick up, it is to be seen if the momentum sustains in the up coming festive season.