Bank lending in India picked up steam in the first quarter of the financial year 2025-26, with scheduled commercial banks (SCBs) seeing a solid 9.9 per cent year-on-year growth in credit offtake. This boost came mainly from rising demand in housing loans, gold loans, and vehicle finance, according to a fresh report from Care Edge Ratings.
What fueled this growth? The MSME sector led the charge with an impressive 19.3 per cent jump, helping offset slower rises in areas like agriculture (6.8 per cent), industry (5.5 per cent), and services (9.6 per cent). It’s clear that small businesses and personal loans are driving the credit expansion in India right now.
Public sector banks (PSBs) continue to shine, outpacing private sector banks (PVBs) for the third straight quarter. Why? PSBs have more room to lend thanks to their stable credit-to-deposit (CD) ratios, giving them an edge over private players.
Regionally, the northeastern states stole the show with 13.7 per cent annual growth in bank credit, while rural areas grew the fastest at 12.8 per cent. This highlights how banking services are reaching even remote corners of the country.
On interest rates, things look promising for borrowers. In June, outstanding credit in the 7-8 per cent bracket climbed to Rs 33.1 lakh crore, up from Rs 20 lakh crore a year earlier. Low-rate loans under 6 per cent also surged to Rs 18.3 lakh crore from Rs 5.3 lakh crore. Meanwhile, high-interest loans above 11 per cent dipped to Rs 27 lakh crore from Rs 30.3 lakh crore. Banks seem to be shifting focus to mid-range yields, making loans more affordable for many.
Deposits grew even faster than credit, at 10.9 per cent year-on-year, thanks to aggressive campaigns by private banks and attractive rates on certain products. In total, deposits swelled by Rs 22.6 lakh crore by June 2025. As a result, the CD ratio eased to 79.6 per cent from 80.4 per cent last year—a drop of 78 basis points—showing deposits are outrunning credit growth.
The RBI’s recent rate cuts have improved liquidity, narrowing the gap between credit and deposits compared to before. Overall, this points to a healthier banking sector in India, with steady growth in bank loans and deposits setting a positive tone for the economy.
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