Bank credit growth is expected to outpace deposit expansion in fiscal 2027, with analysts projecting credit growth of 12-14% compared to deposit growth of 10-12%. According to The Economic Times, this trend follows a pattern where credit has consistently grown faster than deposits for over a decade. Madan Sabnavis, chief economist at Bank of Baroda, stated that for FY27, deposit growth is expected at 10-12% and credit growth at 12-14%, based on an assumption of real GDP growth of around 7%. As per State Bank of India's Soumya Kanti Ghosh, group chief economic adviser, credit growth is expected at 13-14% while deposit growth is estimated at 11-12% for the fiscal year.
The previous fiscal year showed significant growth acceleration, with credit growing 16.1% in FY26 compared to 11% in FY25, while deposits rose 13.5% versus 10.1% the prior year, according to RBI data reported by The Economic Times. Bank deposits totalled ₹262.30 lakh crore as of March 31, reflecting an increase of ₹31.14 lakh crore during the year, an all-time high and well above the addition of ₹21.14 lakh crore in FY25. The incremental credit-deposit ratio was 95%, with the overall CD ratio hitting an all-time high of 85%, up from 79.61% last year. In the final fortnight of the fiscal year, deposits rose by ₹12.19 lakh crore, contributing significantly to the overall growth.
Revised liquidity coverage ratio norms are expected to significantly impact the banking sector's lending capacity. As reported by The Economic Times, Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, noted that revised LCR norms are likely to free up ₹2.7-3.0 lakh crore of lendable resources, which will help bridge the gap between deposit and credit growth. However, declining CASA ratios remain a major concern, signalling a shift from low-cost, stable deposits to more expensive funding sources, compressing net interest margins. The structural challenge runs deeper than the current rate cycle, with deposit growth losing ground to credit expansion for more than a decade.
The current trend reflects a long-term pattern where credit expansion has consistently outpaced deposit growth. Between FY24 and December 2025, deposits grew 9% against credit growth of 11.3%. In the preceding two years (FY22 to FY24), the gap was even wider with deposits growing 11.9% while credit expanded 17.6%. The dynamics reversed between FY18 and FY22, when deposits grew 10.5% against credit 8.7%, and between FY10 and FY14, when deposits grew 15% against 17% by credit. This persistent pattern underscores the structural challenges facing the banking sector in maintaining deposit growth rates.
