Bank credit growth moderates to 13%; deposit growth eases to 10.6%

Bank credit growth slowed to 13.1% and deposit growth to 10.6% in early January, RBI data shows, though FY26 credit outlook remains positive

Bank credit growth in the first fortnight of calendar year 2026 (January 15) slowed down to 13.1 per cent year-on-year (Y-o-Y) and deposit growth during the same period also slowed down to 10.6 per cent (Y-o-Y), latest data from the Reserve Bank of India (RBI) showed. In the fortnight, credit contracted by ₹1.88 trillion, while deposits contracted by ₹3.57 trillion.

 

This comes after the last fortnight of calendar year 2025 (December 31) reported credit growth of 14.5 per cent Y-o-Y and deposit growth of 12.7 per cent Y-o-Y.

 

Sector-wise data till December-end showed gold loans continued to surge, which grew by 127.6 per cent to ₹3.82 trillion, while growth in credit card outstanding was muted at 1 per cent Y-o-Y to ₹2.94 trillion. Overall retail loans grew by 14.4 per cent Y-o-Y to ₹68.48 trillion as compared to 12 per cent a year ago.

   

Apart from gold loan, vehicle loans sustained robust credit growth, while housing witnessed steady growth.

 

Credit to services sector registered a 15.3 per cent Y-o-Y growth, supported by higher growth in segments such as ‘non-banking financial companies’ (NBFCs), ‘trade’ and ‘commercial real estate’. Bank loans to NBFC also picked up, which grew by 15.1 per cent as compared to 6.5 per cent a year ago.

 

Bank credit to the industry also improved, which grew by 13.3 per cent as compared to 7.5 per cent a year ago. Within industry, loans to petroleum, coal products and nuclear fuel grew by 39 per cent Y-o-Y as compared to 6.5 per cent a year ago. Loan to petrochemicals grew by 29.5 per cent as compared to 10.2 per cent.

 

While credit to ‘Micro and Small’ showed sharp acceleration in growth at 31 per cent Y-o-Y, ‘Medium’ industries continued to exhibit robust expansion at 20.4 per cent Y-o-Y. Credit to large industries also picked up growing at 7.5 per cent Y-o-Y.

 

Among major industries, outstanding credit to ‘infrastructure’, ‘all engineering’, ‘basic metal and metal products’, ‘chemical and chemical products’, ‘textiles’ and ‘petroleum, coal products and nuclear fuels’ registered resilient growth, RBI said.

 

In the October-December (Q3) quarter, major banks reported healthy credit growth, aided by Goods and Services Tax (GST) rationalisation on products and services, rate cuts by the Reserve Bank of India (RBI), and a pick-up in wholesale credit demand. The latter was driven by elevated corporate bond yields and faster transmission in bank lending rates, which narrowed the rate differential between loans and bonds.

 

Typically, in Q4 (January-March) quarter, credit growth accelerates, said experts.

 

“Credit growth in Q3 received a boost from the festival season, GST rate cuts, while the sharp rise seen in the fortnight ended December 31 was largely on account of quarter-end effects, and base effects. As such, the subsequent moderation in credit growth in the first fortnight of the calendar year is on expected lines. The outlook, however, remains positive, with credit growth in FY26 projected at around 12.5 percent. Deposit growth is expected to lag, which could lead to increased reliance by banks on certificates of deposit (CDs) for funding,” said Saurabh Bhalerao, associate director, BFSI CareEdge Ratings.

 

Additionally, RBI data showed lending rates softened in December, but rates on fresh deposits inched up. The weighted average lending rate (WALR) on fresh rupee loans of banks declined to 8.28 per cent in December 2025 from 8.71 per cent in November, while the WALR on outstanding rupee loans eased to 9.06 per cent from 9.21 per cent over the same period.

 

The one-year median marginal cost of funds-based lending rate (MCLR) of banks also inched down to 8.4 per cent in January 2026 from 8.45 per cent in December 2025. On the deposit side, the weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits edged up to 5.67 per cent in December 2025 from 5.59 per cent in November, even as the rate on outstanding term deposits softened to 6.68 per cent from 6.73 per cent.