Indian commercial banks have witnessed a remarkable surge, with credit growth accelerating to a two-year high of 18.6 per cent year-on-year by June 27, complemented by an impressive Rs 7 trillion in deposit mobilisation, reflecting robust economic activity and strategic lending initiatives.
![Bank deposit](https://im.rediff.com/news/2026/jun/22deposit.gif" "Bank deposit")
Key Points
- Indian commercial banks achieved an 18.6 per cent year-on-year credit growth by June 27, the highest in two years.
- Banks mobilised approximately Rs 7 trillion in deposits during the last fortnight of June, marking the third-highest fortnightly growth in 29 years.
- A significant portion of the loan growth is attributed to the government's Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, particularly benefiting MSMEs.
- Elevated debt market yields have redirected infrastructure financing and corporate borrowings towards banks, further supporting loan growth.
- Credit growth was broad-based across sectors, with industry, services, retail, and agriculture all showing significant expansion.
Commercial banks' credit growth accelerated to a two-year high of 18.6 per cent year-on-year (Y-o-Y) in the fortnight ended June 27, while they mobilised nearly Rs 7 trillion in deposits as lenders stepped up efforts to meet their quarter-end business targets.
This marked the third-highest fortnightly deposit mobilisation in 29 years.
According to the latest data released by the Reserve Bank of India (RBI), banks disbursed loans worth Rs 3.8 trillion during the last fortnight of June, while deposits rose by Rs 6.97 trillion.
Factors Driving Growth
"Overall deposits within the banking system jumped by around Rs 7 trillion in the fortnight ended June 30, the third-highest fortnightly growth in 29 years.
"Netting out the quarter-end deposit mobilisation, we believe the surge also reflects a potential jump in capital flows through FCNR(B) deposits, ECBs and OFCBs," SBI Research said in a note.
A significant part of the loan growth may have been driven by lending under the government's Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, which has seen strong traction among micro, small and medium enterprises (MSMEs).
The government has issued more than 140,000 guarantees worth over Rs 1.55 trillion under ECLGS 5.0 since its launch in May.
"Credit growth appears to have been supported by multiple factors. A portion of the increase could have come from disbursements under the government's ECLGS 5.0 scheme, which has seen traction.
"At the same time, elevated debt market yields have pushed infrastructure financing and other corporate borrowings towards banks," said Saurabh Bhalerao, director and head – BFSI Research at CareEdge Ratings.
Market Dynamics and Outlook
"Corporate credit demand has also supported loan growth.
However, this momentum is likely to moderate as geopolitical tensions ease and debt market yields soften, making market borrowings more attractive," said Bhalerao.
In the last fortnight of March 2026, banks had mobilised Rs 12.2 trillion in deposits, while loans increased by Rs 5.92 trillion.
Deposit growth had stood at 13.5 per cent year-on-year at the end of March.
The gap between credit and deposit growth remained above 500 basis points.
Sectoral Performance
Sectoral deployment of credit data up to the end of May showed broad-based growth across segments.
Credit to industry rose 17.5 per cent Y-o-Y, led by sustained expansion in lending to micro and small enterprises and medium industries.
Credit to the services sector grew 20.4 per cent Y-o-Y, while retail loans expanded 15.4 per cent.
Agricultural credit registered growth of 14.9 per cent during the period.
Interestingly, bank credit growth continued to outpace that of non-banking financial companies (NBFCs).
While bank credit grew 17.7 per cent Y-o-Y as of May-end, NBFC credit growth stood at 14.2 per cent over the same period.
