Key Highlights
- Bank credit expanded close to 12% YoY by mid‑December 2025, outpacing deposit growth which decelerated to 9.35%.
- The credit‑deposit gap widened to 263 basis points, underscoring mounting liquidity pressure.
- Deposits fell by ₹1.28 trillion over the fortnight, while total credit rose by ₹1.65 trillion.
- RBI responded with a near‑₹3 trillion liquidity injection through OMOs and FX swaps.
- Repo‑rate cuts have lowered both lending and deposit rates, yet deposit‑rate flexibility remains constrained.
Detailed Insights
The Reserve Bank of India’s revised figures for the period ending 15 December 2025 reveal a pronounced divergence between the growth trajectories of credit and deposits. Credit extended by scheduled commercial banks surged to ₹196.69 trillion, a rise of roughly ₹1.65 trillion compared with the same date in the prior year. By contrast, total deposits slipped to ₹241.31 trillion, reflecting a contraction of ₹1.28 trillion over the same fortnight.
This mismatch has widened the credit‑deposit ratio (CDR) gap to 263 basis points, a metric widely interpreted as a barometer of systemic liquidity stress. The slowdown in deposit mobilisation limits banks’ capacity to fund the robust loan demand, pressuring them to either raise deposit rates—risking margin erosion—or turn to market borrowing and RBI liquidity facilities.
In an effort to alleviate the strain, the RBI has deployed an aggressive liquidity‑support programme comprising open‑market operations, foreign‑exchange buy‑sell swaps, and a total infusion estimated at nearly ₹3 trillion. Parallelly, a cumulative repo‑rate reduction of 125 basis points has translated into modest declines in both fresh and outstanding loan rates (‑69 bps and ‑63 bps respectively) and a sharper drop in fresh term‑deposit rates (‑105 bps).
Looking ahead, analysts anticipate that the deposit‑shortfall will persist into the fourth quarter of FY 26, compelling banks to navigate a delicate balance between maintaining profitability and sustaining credit growth.
Key Concepts
- Credit‑Deposit Ratio (CDR): The proportion of total deposits that banks deploy as loans; an expanding gap signals liquidity constraints.
- Liquidity Stress: A condition where banks face difficulty matching loan demand with available funding sources, often prompting central‑bank intervention.
- Open Market Operations (OMO): RBI’s tool for injecting or absorbing liquidity by buying or selling government securities in the secondary market.
- Repo Rate: The policy rate at which banks borrow short‑term funds from the RBI against government securities; cuts aim to lower overall interest rates.
- Basis Point (bp): One‑hundredth of a percentage point, used to express small changes in interest rates.