#Credit - Business Outrank

The credit expansion of banks slowed down at the beginning of 2026, which indicated a slow beginning of the year among credit providers. According to a report released by the Reserve Bank of India, credit has been growing at 13.1 percent per annum during the two weeks up to the fifteenth of January. The growth in deposits also slowed down to 10.6 percent in the same period. Both lending and deposits were contracted in absolute terms. During the period, the credit and deposits declined by 1.88 trillion and 3.57 trillion, respectively. This is after more adequate numbers towards the end of December, when credit increased 14.5 percent, and deposits increased 12.7 percent, and it is in part due to quarter-end corrections. There is imbalanced momentum in sector trends. Gold loans also continued to keep going up with the year on year rise of 127.6 per cent to 3.82 trillion. Credit card balances increased by only 1 percent, which shows discretionary spending. Retail loans grew by 14.4 percent to 6848 trillion, which was facilitated by vehicle and housing loans. The services sector loans also remained steady. The credit increased by 15.3 percent, with the largest increase in credit being driven by increased demand by non-banking financial companies, trade, and commercial real estate. Bank Lending to NBFCs increased at a high rate of 15.1 percent growth as opposed to 6.5 percent in the previous year. Industrial credit also performed better. The industry credit growth stood at 13.3 percent as compared to 7.5 percent the previous year. Under this, the petroleum and coal products increased by 39 percent, and petrochemicals increased by 29.5 percent. The micro and small enterprises were flourishing with a growth rate of 31 percent, and the medium industries were also emerging at 20.4 percent. Banks had recorded improved growth in credit in the period October to December. Rationalisation of GST, reduction in policy rates, and an increase in the yield of corporate bonds assisted in pushing companies to bank loans. In our opinion, the moderation at present is a seasonal phenomenon, and not a steep decline in demand. There is a forecast by analysts that deposit growth will keep lower than credit. This might compel banks to rely more on the wholesale financing through certificates of deposit. CareEdge Ratings indicated that the credit growth in FY26 may remain close to 12.5 percent despite the depression in deposit accretion. There is some relief observed in the trend of interest rates by borrowers. Fresh rupee lending rates dropped to 8.28 percent in December, compared to the previous months of 8.71 percent. Meanwhile, the fresh deposit rates slightly increased, which suggests that the banks continue their race to obtain their funds that would help to promote the lending growth.

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