Credit Growth Nears 12% as Deposit Growth Slows

India’s banking system is witnessing strong credit demand, but deposit growth is not keeping pace. Latest data released by the Reserve Bank of India (RBI) shows a widening gap between credit and deposits, pointing to continued liquidity tightness.

Why in the News?

As per revised RBI data up to December 15, 2025, bank credit growth rose to nearly 12% year-on-year, while deposit growth slowed to 9.35%. This widened the credit–deposit gap to 263 basis points, highlighting pressure on banking system liquidity.

Latest Credit and Deposit Growth Trends

In the previous fortnight (ended November 28), credit growth was 11.5%, while deposit growth stood at 10.2%, showing a further slowdown in deposits.

• Credit growth: Nearly 12% YoY as of December 15
• Deposit growth: Slowed to 9.35% YoY
• Credit deposit gap: 263 basis points

Indicates strong loan demand but weaker deposit mobilization

Credit and Deposits in Absolute Numbers

According to RBI’s revised data,

Total bank credit

• ₹196.69 trillion (Dec 15, 2025)
• ₹175.86 trillion (Dec 15, 2024)

Increase of ₹1.65 trillion during the fortnight

Total bank deposits

• ₹241.31 trillion (Dec 15, 2025)
• ₹220.06 trillion (Dec 15, 2024)

Deposits declined by ₹1.28 trillion during the fortnight

This fall in deposits during the fortnight reflects continued liquidity stress.

Why Deposit Tightness Is a Problem for Banks

• Banks need more deposits to fund rising credit demand
• Cutting deposit rates may protect margins but can push savers towards equity markets
• Limited scope to reduce rates further while credit demand remains strong
• Liquidity pressure is expected to continue into Q4 FY26

RBI’s Liquidity Support Measures

To ease liquidity stress, the RBI has announced,

• Open Market Operations (OMO) purchases
• Foreign exchange buy sell swap
• Total liquidity infusion of nearly ₹3 trillion

These steps aim to support credit growth and stabilize the banking system.

Impact of Repo Rate Cuts on Interest Rates

RBI has cut the repo rate by 125 basis points in the current cycle

Lending rates response,

• Fresh rupee loans: down 69 bps (Feb-Oct 2025)
• Outstanding loans: down 63 bps

Deposit rates response,

• Fresh term deposits: down 105 bps
• Outstanding deposits: down 32 bps

About Credit-Deposit Ratio

• Credit–Deposit Ratio (CDR) shows how much of deposits are used for lending
• A rising gap between credit and deposit growth signals liquidity stress

High credit growth with low deposit growth can,

• Increase funding costs
• Reduce banks flexibility
• Push banks to borrow from markets or RBI

Key Takeaways At Glance

Question

Q1. As per RBI data till December 15, 2025, credit growth in India stood at approximately:

A. 9%
B. 10.5%
C. 12%
D. 14%