Credit and Deposit Surge Before FY26-End Raises a Bigger Question: Is Economic Momentum Returning?
A sharp rebound in bank credit and deposit growth toward the end of January is offering fresh clues about the state of India’s economy. After a brief dip earlier in the month, the latest data from the Reserve Bank of India (RBI) shows a strong pick-up in both lending and deposit mobilisation, suggesting that economic activity may be regaining traction despite global uncertainties.
For investors and market participants, banking data is more than a routine statistic. Credit growth often acts as a leading indicator of investment, consumption, and business confidence. When companies and individuals borrow more, it typically signals expansion plans, capital expenditure, or stronger demand conditions. Likewise, deposit growth reflects liquidity, savings behaviour, and risk sentiment.
The latest numbers point to a financial system that is not slowing down but recalibrating and then accelerating again.
RBI Data Shows a Dramatic Fortnight Reversal in Lending and Deposits
According to RBI data, bank credit jumped by ₹3,40,934 crore in the fortnight ended January 31, 2026. Deposits rose even more sharply by ₹3,80,346 crore during the same period. This rebound is particularly striking because it reverses the contraction seen in the previous fortnight.
In the fortnight ended January 15, credit had fallen by ₹3,55,765 crore while deposits declined by ₹1,88,383 crore. Such volatility is not unusual in high-frequency banking data, but the scale of the rebound has caught economists’ attention.
On a year-on-year basis, credit growth stood at 14.40% as of January-end 2026, outpacing deposit growth of 12.42%. This gap indicates sustained demand for loans and highlights the importance of deposit mobilisation for funding future lending.
For markets, a faster credit growth trajectory generally supports banking sector earnings and economic activity expectations.
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Corporate Loan Demand Emerges as the Key Driver
Much of the recent credit pick-up appears to be driven by corporates drawing down previously sanctioned loans. Public sector banks have reported strong sanction pipelines, indicating future lending visibility.
Key disclosed pipelines include:
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State Bank of India: ₹7.86 lakh crore
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Punjab National Bank: ₹1.02 lakh crore
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Bank of Baroda: ₹75,000 crore
Ashwini Kumar Tewari, MD of SBI, said the bank is seeing a pickup in corporate loans, especially in:
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Power and renewables
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Metals
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Infrastructure
He also highlighted that RBI’s decision to allow banks to finance Real Estate Investment Trusts (REITs) and acquisitions by Indian companies could expand corporate lending opportunities and improve margins.
For investors, strong corporate credit demand often signals capex revival and sectoral growth momentum.
Deposit Growth Supported by Bulk Funds and Market Volatility
On the liability side, deposit inflows appear to have been aided by a shift in investor behaviour. With equity markets seeing volatility toward the end of last month, some funds may have moved back into bank deposits, especially bulk deposits.
Ashok Chandra, MD & CEO of PNB, said:
“We are mindful of the deposits, the scenarios, the dynamic situation… We have kept deposit rates intact.”
His remarks suggest banks are balancing deposit mobilisation with cost management rather than aggressively hiking rates.
Madan Sabnavis, Chief Economist at Bank of Baroda, noted that high-cost bulk deposits and Certificates of Deposit are helping bridge the credit-deposit gap.
This indicates banks are proactively managing funding needs as loan demand rises.
What Economists Read From the Numbers
Economists see the large credit swing as evidence of corporate activity rather than retail borrowing.
Sabnavis said:
“If you consider these kinds of large numbers, it’s definitely a case of saying there is buoyancy in the economy.”
Retail loans typically do not move system-level numbers so sharply in a single fortnight. Large corporate drawdowns, however, can. This points toward investment-led demand rather than just consumption.
For investors, this distinction matters because corporate capex cycles often drive multi-year growth trends.
Here’s What Happened Today and Why Traders Reacted
Market participants reacted to the data because it hints at underlying economic strength. Traders watch credit trends closely as they influence:
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Bank profitability
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Liquidity conditions
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Interest rate expectations
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Sectoral growth outlooks
A strong credit pick-up can support positive sentiment toward banking and infrastructure-linked stocks.
What This Means for Investors and Portfolios
For investors, the implications are constructive but require nuance.
Potential portfolio impacts:
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Positive for bank earnings outlook
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Supportive for infrastructure and capex themes
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Signals resilience in domestic demand
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Highlights need to watch deposit-cost trends
However, if credit grows much faster than deposits for a prolonged period, funding costs could rise. So the balance between the two remains important.
A Banking Signal That the Economy May Be Finding Its Stride
The latest RBI data suggests India’s economy may be shaking off external headwinds such as global trade fragmentation and geopolitical risks. A revival in credit demand, especially from corporates, often precedes broader economic acceleration.
For now, the message from the banking system is one of cautious optimism. If the trend sustains into coming months, it could reinforce the narrative of steady domestic growth even in a volatile global environment. For investors, that is a signal worth tracking closely.
