Diverging Trends: Credit Offtake Up, Deposit Growth Slows by CareEdge Ratings
Synopsis
* Credit growth has continued to outpace deposits in the current fortnight. Meanwhile, deposit growth has remained below the double-digit threshold for the last two months.
* As of October 17, 2025, total credit off-take reached Rs 192.1 lakh crore, marking an 11.5% year-onyear (y-o-y) growth. This increase was mainly driven by seasonal festive demand, GST rate reductions, retail and MSME sector activity, and some interest from corporates due to rising bond yields. Additionally, strong vehicle financing during the festive season is expected to boost overall credit growth. The current growth rate matches last year’s 11.5% (excluding the impact of mergers) effects).
* Deposits increased by 9.5% y-o-y, reaching Rs 238.8 lakh crore, down from 11.7% growth recorded in the previous year (excluding merger effects). The moderation in deposit growth can likely be attributed to the fact that banks are now in the rate-cutting cycle, and investors are turning to alternative avenues. Furthermore, the moderation in deposit growth in the current fortnight is attributed to a rise in the currency in circulation, rising by about Rs 1 lakh crore y-o-y due to festive-season cash withdrawals.
* As of October 24, 2025, the short-term weighted average call rate (WACR) increased to 5.53%, up from 5.47% in the previous fortnight and is now three basis points (bps) above the repo rate of 5.50%. The rise in WACR reflects tighter liquidity conditions in the banking system, driven by increased credit demand, even as the RBI continues to manage liquidity through variable repo rate operations (VRR).
Bank Credit Growth Maintains Its Upward Trajectory
Figure 1: Bank Credit Growth Trend (y-o-y%, Rs lakh crore)
* Bank credit off-take increased by 11.5% y-o-y and reached Rs 192.1 lakh crore as of the fortnight ending October 17, 2025. This reflects a slight decline of 0.3% from the previous fortnight. The growth was primarily driven by seasonal festive demand, the significant impact of GST rate reductions, demand from the retail and MSME sectors, and some corporate demand resulting from rising bond yields. Additionally, robust vehicle financing during the festive period is expected to support overall credit growth further. Currently, the growth rate aligns with last year’s 11.5% growth, excluding effects from mergers
Figure 2: Bank Deposit Growth Rate Falters for the Fortnight (y-o-y, %)
* As of October 17, 2025, aggregate bank deposits stood at Rs 238.8 lakh crore, reflecting a 9.5% y-o-y rise and a 1.0% sequential decline over the previous fortnight. The deposit growth remained below the 11.7% (exmerger) growth seen a year earlier, attributed to investments into alternative avenues yielding higher returns. This decline in deposits during the current fortnight was driven by temporary factors, such as festive-season cash withdrawals and an increase in currency in circulation, which rose by around Rs 1 lakh crore y-o-y. Time deposits, which account for 87.6% of total deposits, grew 8.6% y-o-y to Rs 209.1 lakh crore, marking a slowdown from 11.6% in the corresponding period last year. Meanwhile, demand deposits rose 16.9% y-o-y, compared to 13.0% a year ago, and currently stand at Rs 29.8 lakh crore, comprising 12.4% of the total deposit base.
Figure 3: Credit-to-Deposit Ratio rises, Breaches the 80% Mark again - incl. merger impact
* The credit-to-deposit (CD) ratio increased to 80.4% in the current fortnight, surpassing the 80% mark. The uptick was led by a sharper expansion in credit offtake compared with the relatively modest growth in deposits.
Bank Credit Share Dips Marginally, while Government Investments Share remains flat
Figure 4: Proportion of Govt. Investment and Bank Credit to Total Assets (%)
* The bank credit-to-total-assets ratio marginally declined by one basis point to 72.4%. In contrast, the Government Investment-to-total-assets ratio remained flat, settling at 25.9%. Total government investments stood at Rs 68.8 lakh crore as of October 17, 2025, registering a y-o-y growth of 6.1% and a modest sequential increase of 0.1%.
O/s Commercial Papers (CPs) and Certificates of Deposit (CDs) Increase Sequentially
Figure 5: Certificate of Deposit O/s Figure 6: Trend in Certificates of Deposit Issued (Rs ’000, crore) and RoI
Figure 7: CP Outstanding Figure 8: Trend in CP Iss. (Rs ’000, crore) and Return on Investment (RoI)
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