The divergence between bank credit expansion and deposit growth in India is likely to persist, according to a new assessment from State Bank of India’s economic research department.
The lender’s analysts warned that ongoing geopolitical tensions and external supply shocks could sustain the imbalance, complicating liquidity management for the banking sector.
25%, reflecting a cautious stance amid persistent inflationary pressures.
Data from the fortnight ended 30 June 2026 showed bank credit growing at a rapid 18.6%, significantly outstripping the pace of deposit accumulation.
This widening wedge suggests that banks are extending loans faster than they are gathering funds from savers, a dynamic that can strain liquidity buffers if not offset by market borrowing or central bank intervention.
The Reserve Bank of India recently held its key policy rate steady at 5.25%, reflecting a cautious stance amid persistent inflationary pressures.
The central bank’s decision underscores the delicate balance between supporting economic growth and managing price stability, a challenge that is further complicated by the current credit-deposit mismatch.