Bank credit growth in India has demonstrated remarkable momentum, with total bank credit from All Scheduled Banks reaching ₹224.14 lakh crore as of 30 June 2026. According to the latest data released by the Reserve Bank of India, this represents a significant year-on-year surge of around 18.6%, indicating robust lending activity across the banking sector. The growth trajectory shows sustained momentum in credit expansion, reflecting strong demand for banking services and effective credit delivery mechanisms.
The banking system has experienced persistent and rapid expansion in bank credit with 18.6% growth for the fortnight ended 30 June 2026, as noted in the Economic Research Department's report. Concomitantly, deposit growth has improved to 13.3%, closely aligning with long-term trends in deposit growth and tracking nominal GDP growth. According to SBI's Economic Research Report, the gap between credit and deposit growth currently stands at over 530 basis points, which is likely to remain elevated if geopolitical risks and external supply shocks persist. As per the report, credit growth has consistently surpassed deposits growth, resulting in a gap widening to 5.3% in June 2026. The report highlights that supply-side shocks are transmitted asymmetrically across banking aggregates, with bank credit growth responding more strongly than bank deposits growth. The combined contribution of crude oil and food inflation shocks to credit variance rises from 23.48% in the first quarter to 31.19% by the tenth quarter, compared with an increase from 6.26% to 17.60% for deposits, with crude oil shocks being the dominant source of such variation in credit. "Supply shock invariably creates liquidity gaps through wedge between deposit and credit growth and indicates one of the many dimensions of geopolitical risk to banking system in India," SBI Research said.
The banking sector has undergone significant structural transformations since the pandemic, with SBI Research identifying three major shifts in deposit dynamics. A shift in deposit mobilisation towards semi-urban and rural areas has emerged as a key trend, with the report attributing this to rising women's empowerment and the proliferation of women-centric government schemes. Additionally, increasing preference for term deposits over savings accounts reflects changing customer behavior, while changes in the ownership structure of deposits as household savings shift towards market-related instruments indicate evolving deposit preferences. On the credit side, following RBI's regulatory action in 2024, the share of personal loans has declined and credit supply has spilled over to industry, finance and other sectors. Working capital loans such as cash credit, overdraft, demand loans and export credit have registered relatively faster growth than overall credit and term loans since 2022. Post-2022, working capital loans have registered relatively faster growth vis-à-vis overall credit and term loans, coinciding with shocks like COVID-19, Russia-Ukraine War, supply chain disruptions and now West Asia conflict. "The shift in demand for working capital loans is visible from 2021 which was a period of multiple supply side shocks like Covid pandemic, Russia-Ukraine war, disruption in supply chains and now the West Asia conflict," SBI Research noted. Loans to individuals have also slowed with the share of long-term housing loans in overall retail loans declining, as per SBI Research. "With the shift to the new tax regime, people are now repaying their loans faster. NBFCs are also aggressively mobilizing housing loans," SBI Research said.
Trade and NBFC credit are expected to remain among the fastest-growing segments of India's banking system, supported by rising formalisation of economic activity and deeper financial penetration. As per Ashika Institutional Equities report, combined outstanding credit to the trade and NBFC segments increased to ₹34.5 trillion in May 2026 from ₹9.7 trillion in FY18, highlighting the growing role of these segments in system-wide credit growth. Credit to wholesale and retail trade increased from ₹4.7 trillion in FY18 to ₹13.8 trillion in FY26, registering a compound annual growth rate of around 14.5%.
The 18.6% year-on-year growth in bank credit reflects the robust economic environment and strong demand for credit across various sectors. According to SBI's Economic Research Department, the wedge between deposit growth and credit growth may continue if geopolitical risks and external supply shocks persist, though deposit growth will pick up via fresh FCNR(B) deposits. FCNR(B) deposit mobilization could result in some shift towards the 5-year bucket as most of the flows are in that category till now, with around $13-14 billion coming through the FCNR(B) window so far and aggregate deposits estimated to grow 14.5-15% in FY27. SBI's researchers noted that Indian banks are currently in a 'goldilocks period' with credit growth expected to remain strong, supported by consumption demand and capex momentum, while banks prioritise balance sheet discipline. The report stresses that long-term energy decoupling is crucial for sustaining stable economic growth and capital formation. "Rise of term deposits has seen shift in contractual maturity with share of 1–3-year bucket rising as banks strive to balance asset and liability with shift to external benchmark rate regime," SBI Research said.
