Bank deposits hit 10-year high as growth surges to 15.4% as credit demand strengthens nationwide

20 August, 2026
Bank deposits hit 10-year high as growth surges to 15.4% as credit demand strengthens nationwide

Winning Bizness Desk

Bank deposits hit 10-year high as growth surges to 15.4% as credit demand strengthens nationwide

Mumbai.Bank deposits in India grew at their fastest pace in nearly a decade by July 31, even as strong credit demand pushed loan growth to its highest level since May 2024. Deposits rose 15.4% year-on-year to Rs 269.4 lakh crore, marking the sharpest growth since December 2016. Deposit growth stood at 12.7% on July 15 and 10% during the same period last year.

Credit demand rises sharply, narrowing growth gap

Bank credit also accelerated, with outstanding loans rising 19.3% year-on-year to Rs 220.8 lakh crore by July 31. Credit growth had stood at 17.7% on July 15 and 10% a year earlier. During the fortnight, bank credit increased by Rs 3.45 lakh crore, while the loan-to-deposit ratio eased to 81.9% from 82.7% as deposits grew faster during the period.

Key figures from the latest data include:

  • Bank deposits: Rs 269.4 lakh crore
  • Bank credit: Rs 220.8 lakh crore
  • Deposit growth: 15.4% year-on-year
  • Credit growth: 19.3% year-on-year
  • Loan-to-deposit ratio: 81.9%

The faster rise in deposits has helped narrow the gap between credit and deposit growth. The difference, which was around five percentage points earlier, has now reduced to about 3.95 percentage points. However, credit growth continues to outpace deposit growth on a year-on-year basis.

Term deposits remain the biggest source of growth

Term deposits were the main driver of the increase in bank deposits. By July 31, term deposits had risen 14.8% year-on-year to Rs 235.1 lakh crore, compared with 9.2% growth during the corresponding period last year. They accounted for 87.3% of total bank deposits, underlining their dominant role in supporting the overall deposit base.

Demand deposits also recorded growth, rising 19.3% year-on-year, compared with 18.7% a year earlier. Banks also received significant support from higher FCNR (B) deposits under the Reserve Bank of India's special swap facility, which contributed to the overall improvement in deposit mobilisation.

Bank lending jumps nearly three times fiscal pace

Credit growth has picked up sharply since the beginning of financial year 2027. Banks have added Rs 7.18 lakh crore to their loan books so far this fiscal, compared with an increase of only Rs 2.58 lakh crore during the corresponding period last year. The current pace is therefore nearly three times last year's level.

Some factors, however, need to be kept in perspective:

  • The low base of the previous year has amplified the growth rate.
  • Changes in the reporting period have also influenced the comparison.
  • Despite these factors, underlying credit demand remains strong.

CARE Ratings sees moderation in second half

CareEdge expects credit demand to remain firm in the near term but believes the current 19.3% growth rate is unlikely to continue through the whole of financial year 2027. Companies and non-banking financial companies may increasingly turn to bonds and other market-based funding sources during the second half of the year.

This could reduce their dependence on bank loans and gradually moderate overall credit growth. CareEdge expects bank credit to grow between 14.5% and 15.5% during financial year 2027, considerably below the current year-on-year pace.

Deposit growth gives banks more lending headroom

The latest figures suggest that banks are benefiting from a stronger flow of deposits at a time when demand for loans is also expanding rapidly. The improvement in deposit mobilisation is particularly significant because banks need a steady funding base to support sustained lending.

At the same time:

  • Term deposits remain the backbone of the deposit base.
  • FCNR (B) deposits have provided an additional boost.
  • Credit growth remains stronger than deposit growth overall.
  • The lower loan-to-deposit ratio during the fortnight offers some relief on funding pressures.

With deposit growth now at a decade-high level and credit demand still robust, banks appear better placed to support lending in the months ahead. However, the expected shift by companies and NBFCs towards bonds and other market sources could lead to a moderation in bank credit growth later in financial year 2027.