Commercial banks' credit growth accelerated to a two-year high of 18.6 per cent year-on-year during the fortnight ending June 30, according to the latest data released by the Reserve Bank of India (RBI). This represents a significant improvement from the previous fortnight when credit growth was 17.7 per cent, and marks the strongest performance since the fortnight ending June 14, 2024, when growth reached 19.1 per cent. The strong credit expansion comes as banks rushed to meet quarter-end business targets, demonstrating robust lending demand across sectors despite geopolitical headwinds. Recent quarterly results from major banks like Indian Bank and Bank of Maharashtra further validate this trend, with both institutions reporting strong credit growth in their latest financial statements.
Banks successfully mobilised over ₹7 trillion in deposits during the same period, translating into a growth of 13.3 per cent year-on-year, as reported by the RBI. The deposit accretion of ₹6.97 trillion during the fortnight ending June 30 shows banks' ability to attract substantial funds to support their lending activities. At the end of June 30, outstanding bank credit stood at ₹219.3 lakh crore while outstanding deposits reached ₹265.4 lakh crore. Recent bank earnings confirm this trend, with Indian Bank reporting 13.47 per cent YoY growth in deposits to ₹8.44 trillion and Bank of Maharashtra achieving 12.9 per cent YoY growth in total deposits to ₹3.44 trillion. According to SBI Research, the ₹6.97 lakh crore deposit accretion represents the third-highest fortnightly growth in 29 years, with around ₹3.5 lakh crore attributed to quarter-end deposit mobilisation and the remaining surge driven by potential capital flows through FCNR(B), ECB and OFCB.
According to a CareEdge report, lending and deposit rates are expected to moderate gradually in the coming months as high-cost legacy deposits mature and liquidity conditions remain comfortable. As of May 2026, fresh lending rates stood at 8.51 per cent while fresh domestic term deposit rates were 5.84 per cent, with the spread between fresh lending and deposit rates narrowing by 4 basis points month-on-month to 2.67 per cent. The report notes that outstanding lending rates eased to 8.97 per cent and outstanding deposit rates declined to 6.57 per cent, resulting in a marginal widening of the outstanding spread to 2.40 per cent. CareEdge Economics expects the benchmark 10-year government security yield to average 6.8-6.9 per cent during the year, assuming an average Brent crude price of USD 90 per barrel, which should support banks through treasury gains and improve funding conditions.
The parallel strength in bank lending and commercial paper (CP) issuances demonstrates that companies are using multiple funding channels to meet expanding credit requirements rather than substituting one source for another. CP issuances totalled ₹5.37 trillion during the April-June 2026 period — the highest in 18 quarters, while incremental bank credit more than doubled year-on-year to ₹5.6 trillion. In June alone, CP issuances climbed to a 55-month high of ₹2.55 trillion, largely driven by refinancing of maturing papers. According to IndiaRatings, NBFCs issued ₹1.04 trillion of CPs in June, while corporate issuances stood at ₹80,000 crore, reflecting continued reliance on short-term market funding. The rating agency noted that NBFCs and corporations accounted for most of the increase, supported by easing financial conditions and lower market yields. Broking and financial institutions were the largest CP issuers at around ₹2 trillion, followed by NBFCs at about ₹1.2 trillion, with oil and gas, textiles and apparel, housing finance companies, steel, power, telecommunications, real estate and cement also featuring among leading issuers.
SBI Research reports that India has received $7 billion in FII inflows since the Government announced measures to bring foreign inflows and boost the rupee. The report indicates that cumulative Debt FAR inflows have amounted to $2.7 billion during the period, with an informed estimate suggesting the magnitude of overall capital flows could be around $15 billion, with FCNR(B) flows picking up pace. The RBI's foreign currency reserves increased by $4.4 billion during the fortnight, indicating the central bank's desire to recoup foreign exchange reserves. This surge in foreign capital flows has significantly contributed to the record deposit mobilisation, demonstrating the effectiveness of policy measures to attract international investment. Recent RBI measures, including incentives for FCNR(B) deposits, easing of ECB norms for public sector undertakings, expansion of the Fully Accessible Route (FAR) for G-secs and tax exemptions for FIIs and FPIs, have helped contain external financing pressures.