Credit Demand Soars as Policy Eases: Outstanding Bank Credit Crosses Rs 200 Lakh Cr for the First Time
The latest data indicates a significant shift in credit dynamics as economic policies adapt. Notably, outstanding bank credit surpassed Rs 200 lakh crore for the first time, reaching a remarkable Rs 203.2 lakh crore by December 31, 2025.
Key Highlights:
– Credit Growth Surge: Year-to-date (YTD) credit growth accelerated to 11.4%, up from 8% in the previous year, reflecting a robust recovery fueled by recent rate cuts.
– Increased Credit Demand: Credit demand jumped 14.5% year-on-year as of the end of December, indicating a solid rebound influenced by lower Goods and Services Tax, easing monetary policy, and a rise in investment intentions.
– Investment Proposals on the Rise: Investment proposals surged to Rs 26.62 lakh crore in the first nine months of the financial year, up from Rs 23.62 lakh crore year-on-year, bolstering overall credit growth.
Analysis of Recent Trends
Outstanding bank credit growth is underpinned by a combination of factors, including:
– Sector Performance: The auto loan sector has seen increased demand, traditionally peaking at the close of the calendar year. Small and mid-sized companies, as well as finance companies and the housing sector, have also contributed significantly to credit uptake.
– Historical Context: The reported growth of 14.5% is partly influenced by a favorable base effect; last year’s data was compiled on December 27, 2024, making this year’s figures appear especially high.
Outlook on Credit Growth
– Comparative Forecasts: Credit growth is anticipated to exceed the Reserve Bank of India’s (RBI) previously projected range of 11% for FY26. If sustained, it could surpass projections from both Care Ratings (11.5%–12.5%) and ICRA (10.7%–11.5%).
– RBI Initiatives: After a sharp decline in credit demand to a three-year low of 8.9% in May, the RBI implemented a 50 basis point cut in the repo rate, aiming to stimulate economic activity. Governor Sanjay Malhotra has encouraged banks to nurture the entrepreneurial spirit and drive credit growth.
Additional Insights
– Deposits Growth: Outstanding aggregate deposits rose to Rs 248.5 lakh crore, reflecting a 12.7% year-on-year increase and a 10.1% uptick year-to-date.
– Sector Focus: Around 80% of proposed investments are concentrated in five key areas: electricity, chemicals, metals, IT, and transportation, showcasing potential growth sectors.
In conclusion, as credit demand zooms in a more favorable economic environment, the overall outlook remains positive. The interplay of lower interest rates and increased investment intentions could drive sustained credit growth in the upcoming fiscal periods.