Kolkata: Bank credit expanded the fastest in two years in the fortnight to June 30, rising 18.6% year-on-year despite the geopolitical headwinds, while the deposit growth print recorded at 13.3%, data released by Reserve Bank of India on Friday showed.Last time bank credit grew more than this was in the fortnight ending June 14, 2024 when the print was seen at 19.1%This marked a sustained credit demand from both the consumer and corporate segments amid rising prices, people aware said. The credit growth was seen at 17.7% in the preceding fortnight while deposit grew at 12%. At the end of June 30, the outsatnding bank credit stood at Rs 219.3 lakh crore while outstanding deposits are at Rs 265.4 lakh crore.The trend also reflects a shift in corporate funding preferences as they started relying more on banks for the funding needs instead of borrowing from debt markets due to rising bond yields, people aware said.This latest set of numbers showed a 570 basis points gap between the credit and deposit growth, as against a gap of 530 basis points in the preceding period.One basis point is equal to one-hundredth of a percentage point.While the sequential pick-up in credit delivery reflects a broad-based improvement across key sectors, the higher deposit growth print is a result of the higher inflows of non-resident deposits into banks, senior bank officials said."Bank credit growth is expected to remain healthy in FY27, supported by improving liquidity conditions, sustained government capital expenditure, and steady domestic economic activity, although the growth is likely to gradually normalise from the recent elevated pace," CareEdge Ratings said in a note earlier this week.Past RBI data showed that fortnightly deposit growth print at the end of June is the highest this fiscal. It was seen at 13.5% for the fortnight ended March 21."The RBI's measures to encourage FCNR-B deposits are expected to strengthen banks' liability profile by improving deposit mobilisation and funding availability," the report added.For the financial year so far, credit grew 2.7% while deposits grew 1.2% at the end of June.
Bank credit growth at two-year high at 18.6% as debt market turns costlier
Bank credit expanded significantly in the fortnight ending June 30. Deposit growth also showed a healthy increase during the same period. This credit demand stems from both consumer and corporate sectors. Corporate entities are increasingly favoring banks over debt markets for funding. The gap between credit and deposit growth widened to 570 basis points.
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