Bank credit growth accelerated to 14.6% year-on-year for the fortnight ended January 31, 2026, marking a 19-month high. Outstanding credit now stands at Rs 204 lakh crore. The CD ratio hit record 82.3%, signaling tighter systemic liquidity as deposit growth lags at 12.45%.
Gold loan growth dwarfs every other credit segment by a factor of 8x. This is driven by a convergence of three forces: gold prices hitting all-time highs (above Rs 78,000/10g), making existing gold collateral more valuable; borrowers preferring secured credit with lower interest rates (10-12%) versus unsecured personal loans (14-18%); and aggressive expansion by NBFCs like Muthoot and Manappuram alongside banks entering the segment. The RBI has flagged this growth for supervisory attention, noting potential risks from LTV ratio breaches during gold price corrections.
Bank credit growth has accelerated sharply from a cyclical low of 8.97% in May 2025 to 14.6% in January 2026. Outstanding bank credit now stands at Rs 204 lakh crore, up from Rs 178 lakh crore a year ago. The recovery is broad-based across industry, services, and personal loan segments, driven by monetary easing and improving corporate capex sentiment.
Deposit growth at 12.45% continues to lag credit growth, pushing the Credit-Deposit (CD) ratio to a record 82.29%. This structural gap signals tighter systemic liquidity, sharper competition for deposits, and upward bias on deposit rates. For banks, it means NIM pressure and growing reliance on wholesale funding.
Industry (+13.3%), services (+15.3%), and personal loans (+14.4%) all growing in double digits. Gold loans surged 127.6% YoY, reflecting gold price appreciation and secured credit preference.
Deposits grew 12.45% versus credit at 14.6%, widening the spread to 215 bps. Banks are lending Rs 82 for every Rs 100 in deposits, tightening system liquidity and pushing reliance on wholesale funding.
As deposit competition intensifies, banks will need to raise savings and term deposit rates. With lending rates under pressure from rate cuts, net interest margins face a squeeze.
A record CD ratio of ~82% signals that credit growth continues to outpace deposits. This creates a feedback loop: banks compete harder for deposits, pushing up deposit rates, which compresses margins even as loan demand stays robust. The RBI's liquidity management will be critical to balancing this dynamic through 2026.
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