Indian Banks’ Credit Surges 16.1% as Retail and MSME Lending Outpaces Deposits

Indian Banks’ Credit Surges 16.1% as Retail and MSME Lending Outpaces Deposits​

New Delhi, April 21: Bank lending in India recorded substantial growth during the fortnight ending March 31. According to a report released by CareEdge ratings on Tuesday, bank credit reached Rs 213.6 lakh crore. This figure represents a significant annual growth of 16.1 per cent, marking a jump from the 11 per cent growth recorded in the same period the previous year.

The report highlighted that credit expansion continues to lead deposit accretion, widening the credit-deposit differential. This trend indicates that banks are actively extending credit despite deposit growth rates.

Credit Growth Outpaces Deposit Accretion​

Total bank credit expanded by Rs 6 lakh crore, corresponding to a 2.8 per cent sequential increase. This sequential rise is characteristic of the typical year-end acceleration seen in disbursements.

The robust credit expansion was fueled by strong demand across key segments. Sustained traction was observed in retail lending, particularly for gold and vehicle loans. Furthermore, there was significant financial support for the Micro, Small and Medium Enterprise (MSME) sector.

Increased bank exposure to Non-Banking Financial Companies (NBFCs) and opportunistic corporate borrowing also contributed materially to the overall credit growth figures.

Analyzing the Bank Deposit Landscape​

Aggregate bank deposits registered an increase to Rs 262.3 lakh crore year-on-year, posting 13.5 per cent growth. However, on a sequential basis, deposits rose by 4.9 per cent in the previous fortnight, which analysts attribute to typical year-end seasonality and liquidity flows.

Time deposits, which constitute 85.9 per cent of total deposits, grew by 10.8 per cent year-on-year, reaching Rs 225.4 lakh crore. This growth was marginally higher compared to the 10.5 per cent growth registered a year ago.

Demand deposits also demonstrated a strong acceleration, rising 32.4 per cent YoY. This substantial growth significantly surpassed the 6.8 per cent growth reported during the corresponding period in the prior year.

Elevated CD Ratio and Future Outlook​

The Credit–Deposit (CD) ratio for the fortnight ended March 31 was recorded at 81.4 per cent. While this level remains elevated, the ratio showed a slight moderation when comparing it sequentially to its previous record high of 83 per cent.

As of March-end, the overall credit-to-total assets ratio stood at 73.9 per cent, marking a slight easing of 30 basis points from the previous fortnight.

Industry insights suggest continued robust performance in the lending space. Another recent report forecasts that bank credit is likely to grow around 13 per cent this fiscal year. This forecast is primarily driven by the healthy growth seen in the micro, small and medium enterprise and retail sectors. The data also points to a corporate preference for securing bank loans over traditional bond issuance methods.