MUMBAI – SBI Research today released Issue #15 of its FY27 report, highlighting that the persistent wedge between bank deposits and credit reflects continued geo-political shocks since FY22. According to the report, the banking system has experienced a rapid expansion in bank credit, registering a growth of 18.6% for the fortnight ended June 30, 2026. Concomitantly, deposit growth improved to 13.3%, closely tracking nominal GDP growth. However, since FY23, credit growth has consistently outpaced deposit growth, causing the credit-deposit gap to widen to 5.3% in June 2026. SBI Research notes that supply-side shocks, particularly crude oil shocks, are the dominant source of variation in credit, while food inflation significantly impacts long-term deposit mobilization.
The report identifies three major structural changes in bank deposits post-COVID. First, traditional deposit markets in large metropolitan regions have reached saturation, leading to a visible geographic shift toward semi-urban and rural areas. This rural surge is heavily supported by rising household incomes and government welfare schemes, including the transfer of approximately ₹4 lakh crore under women welfare initiatives in FY26. Second, there is a distinct shift in deposit ownership, with non-financial and financial corporations showing an increasing preference for term deposits, while urban households gradually diversify their savings into higher-yielding market assets like mutual funds and equities. Third, within term deposits, the share of the 1–3-year bucket has risen the most as banks offered peak interest rates to judiciously manage asset-liability alignment under the External Benchmark Lending Rate (EBLR) regime.
On the credit side, total flow of financial resources to the commercial sector during April–May FY27 reached ₹2.82 lakh crore, marking an eight-fold increase compared to the same period in FY26. Industry and personal loans together contributed 75% of this incremental credit growth. Within the industrial sector, infrastructure (especially power), chemicals, vehicles, and engineering categories drove nearly 70% of the growth. Meanwhile, working capital loans have registered a relatively faster growth than term loans post-2022, spurred by global supply chain disruptions and the de-risking mechanisms of the Emergency Credit Line Guarantee Scheme (ECLGS). Despite the widening liquidity gap, the report emphasizes that Indian banks remain well-capitalized with strong Capital to Risk-Weighted Assets Ratios (CRAR) and low Non-Performing Assets (NPAs), providing a solid cushion for sustained credit expansion. Looking ahead, the mobilization of Foreign Currency Non-Resident [FCNR(B)] deposits—which has already brought in $13–14 billion—is expected to accelerate deposit growth to 14.5%–15% in FY27 and help correct the current liquidity imbalances.