Bank Credit Growth Accelerates, Outpacing Deposit Mobilisation in FY26
Bank credit growth has continued to outpace deposit mobilisation throughout the current financial year, tightening system liquidity as lenders aggressively step up loan disbursements. By the end of January 2026, the incremental credit-deposit (CD) ratio had climbed to a significant 96.9%, which is sharply higher than the outstanding CD ratio of 82.3%. This critical metric indicates that banks lent out nearly Rs 97 for every Rs 100 of fresh deposits raised during the year, highlighting a substantial strain on liquidity resources.
RBI Data Reveals Strong Credit Expansion
Data released by the Reserve Bank of India shows that aggregate deposits grew by 10.2% in the financial year up to January 31, with banks adding approximately Rs 23 lakh crore. In contrast, credit expanded at a faster pace, rising by 12.2% or Rs 22.3 lakh crore over the same period. This compares to the year-ago period when deposits had grown by 8.1% and credit by 8.7%, demonstrating a clear acceleration in banking activity.
On a year-on-year basis, credit growth accelerated to a 19-month high of 14.6% as of end-January 2026, compared with 11.4% a year earlier. Meanwhile, deposit growth improved to 12.5% from 10.3%. The sustained gap between these growth rates underscores that credit demand remains robust relative to deposit accretion, putting pressure on banks' funding capabilities.
Non-Food Credit and Economic Linkages
Non-food credit rose by Rs 25.7 lakh crore year-on-year to reach Rs 203.9 lakh crore. Bankers have noted that the bulk of this lending is being funded through household savings rather than surplus central bank liquidity. This shift makes credit growth more closely tied to actual economic activity and GDP expansion, reflecting a healthier, more sustainable financial environment.
Major Banks Raise Growth Targets
Reflecting the strong momentum, several major lenders have raised their growth targets, as communicated during their third-quarter earnings calls. C S Setty, Chairman of State Bank of India, stated that the bank is "balancing resource costs alongside growth visibility of at least 10% in corporate credit over the next two quarters, supported by a Rs 7 lakh crore pipeline", while also gaining market share in home and auto loans. SBI has revised its credit growth guidance to 13-15% for the year.
At ICICI Bank, CFO Anindya Banerjee emphasized that the momentum is clearly visible. "We have seen a pickup in the sequential growth rate, and we see that momentum sustaining into the fourth quarter as well," he said, adding that the improvement is broad-based across both retail and corporate segments.
Retail and MSME Loans Drive Growth
Canara Bank MD and CEO Hardeep Singh Ahluwalia highlighted that retail and MSME loans are primary drivers of growth. "Our RAM book is showing a growth of 18.7%, led by retail, which has grown 31.4%, while MSME is up 13.7%," he explained. He added that yields remain healthy, at 9.3% for MSME advances and 8.9% for retail loans, which supports margins effectively.
Ahluwalia further stated that Canara Bank plans to build on this retail momentum. "Our advances growth guidance is more than 13.6%, and we will capitalise on the momentum that has been built," he said. On the liability side, he noted that savings bank deposits are growing at 8.5%, with individual savings accounts rising over 10%, while current accounts grew nearly 15%.
The overall banking sector is experiencing a period of vigorous credit expansion, driven by strong economic demand and strategic lending initiatives across retail, corporate, and MSME segments.
