India’s bank lending growth accelerates, reaching 17.7% year-on-year in the fortnight ending May 31, 2026, the fastest pace in nearly two years. Multiple reports cite a rise in borrowing demand partly linked to higher crude oil prices, which pressure oil marketing companies’ revenues and prompt greater credit needs after lower realisations following the crude price surge. The reports also point to government support through an emergency credit line guarantee scheme as an additional factor supporting loan demand.\n\nOutstanding bank credit increases by about Rs 1.5 lakh crore between March 31 and May 31, 2026, taking total outstanding credit to Rs 215.2 lakh crore by end-May. While credit expands, bank deposits decline, falling by about Rs 2.3 lakh crore (0.9%) over the same period to a deposit base of Rs 260 lakh crore. This creates a larger funding gap, with the difference between rising loans and shrinking deposits reaching around Rs 3.8 lakh crore in the first two months of FY27. The credit-deposit ratio stays above 80%, indicating continued pressure on banks to fund strong loan growth amid slower deposit mobilisation.
India bank credit growth rises 17.7% as deposits lag amid crude-price pressure
India’s bank lending growth accelerates, reaching 17.7% year-on-year in the fortnight ending May 31, 2026, the fastest pace in nearly two years. Multiple reports cite a rise in borrowing demand partly...
- Bank credit growth reaches 17.7% year-on-year for the fortnight ending May 31, 2026, the fastest in nearly two years.
- Outstanding bank credit rises by about Rs 1.5 lakh crore between March 31 and May 31, 2026, to Rs 215.2 lakh crore.
- Deposits fall by about Rs 2.3 lakh crore (0.9%) over the same period to around Rs 260 lakh crore as of May 31, widening the funding gap.
- Some of the credit demand comes from oil marketing companies affected by lower realisations after crude prices surge.
- Government support via an emergency credit line guarantee scheme contributes to higher credit offtake.
India's bank credit growth accelerated to its fastest pace in nearly two years, driven in part by rising borrowing from oil marketing companies hit by lower realisations following the recent surge in crude prices, according to a report by Times of India. Credit expanded 17.7% year-on-year in the fortnight ended May 31, 2026 — the strongest growth recorded so far in FY27 and the highest since June 2024.Also read: ATMs hungry, but not for more cashOutstanding bank credit rose by Rs 1.5 lakh crore between March 31 and May 31, 2026, marking a 0.7% increase in the first two months of the financial year, the report said. Total outstanding credit reached Rs 215.2 lakh crore by the end of May.Crude prices drive the boomBankers told ToI that part of the increase in credit demand came from oil marketing companies facing lower realisations after crude oil prices surged. They also cited government support through the emergency credit line guarantee scheme as a factor boosting credit offtake.While lending picked up sharply, deposits moved in the opposite direction. Aggregate bank deposits fell by Rs 2.3 lakh crore, or 0.9%, from March-end levels, taking the total deposit base to Rs 260 lakh crore as of May 31.The divergence between credit and deposit growth widened the funding gap in the banking system. The report said the difference between rising loans and shrinking deposits reached around Rs 3.8 lakh crore during the first two months of FY27.Deposit growth continued to lag credit expansion. As of May 31, deposits were growing at 12.2%, more than five percentage points slower than credit growth.Also read: World Bank Raises India's FY27 Growth Forecast to 6.6%Banking system's credit-deposit ratio above 80%The mismatch has kept the banking system's credit-deposit ratio above 80% since October 2025. The ratio stood at 82.8% in May 2026 after peaking at more than 83% at the end of March, reflecting continued pressure on banks to fund robust loan demand amid weaker deposit mobilisation.To support lending, banks have adjusted their balance sheets by slowing investments in government securities, ToI reported. Growth in such holdings dropped to around 2% in January 2026 before recovering modestly to 4.9% by May-end, as lenders sought to free up liquidity.The current trend shows a tightening banking environment in which loan growth continues to outpace deposit mobilisation, leaving banks with a higher credit-deposit ratio and a widening funding gap.
2 months agoCredit growth stood at 17.7% for the fortnight ending May 31, 2026, the highest recorded so far in the current financial year and the strongest year-on-year expansion since June 2024. Outstanding bank credit rose by Rs 1.5 lakh crore since March 31, 2026, marking a 0.7% increase (year-to-date), with total credit touching Rs 215.2 lakh crore. Bankers said demand is being driven partly by oil marketing companies facing lower realisations after the surge in crude prices. They added that govt support through the emergency credit line guarantee scheme has also lifted credit offtake.
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