NEW DELHI, Mar 26: Credit flows accelerated sharply in FY26, rising 61pc Year-to-Date (YTD) to Rs 25.1 tn and coming close to deposit mobilisation of Rs 26.1tn, which grew 21pc YTD, said YES Bank report released here on Thursday.
The report ‘MSME and Retail-led Credit Pull in FY26’ noted that fresh deposit mobilisation has witnessed a slow place since 2024, while credit demand across sectors like retail, infrastructure, and MSME are stable.
Highlighting the rationale behind slow banking sector deposit growth, the report pointed out lower net financial savings of the housing sector. The Cash-to-Deposit (C/D) ratio is at 82.4pc, which is the highest since FY15, which shows tighter liquidity.
“With buffers thinning and the funding gap narrowing, banks have also been relying more on CDs, pushing up funding costs and partially negating the easier monetary policy stance,” it said.
The bank’s report noted that sectoral deployment data for the current fiscal shows that credit momentum is led by personal loans, followed by the services sector, with industry credit.
The share of personal loans have increased from 29 to 33pc in recent years, which is supported by GST rationalisation and tax reliefs boosting household income.
Coming to the personal loan segment, vehicle loans have overtaken housing loans as the main growth driver since Q3FY26.
“Micro and small industries added Rs 2.38tn while medium enterprises added Rs 630bn supported by union budget push towards credit guarantee for the segment and new enhanced definition of MSMEs.”
The report warned that if the West Asia crisis continues and energy prices remain elevated, then it may hamper sustainability.
“Domestic growth can weaken due to West Asia conflict, higher oil prices, and lower exports to the region.”
“There can be upside pull for working capital loan from higher inventory costs on account of higher input prices, while a downward pull from working capital may come from lower domestic economic activity.”
Overall, the report showed a predictability of slowing credit growth in FY27. Coming to the domestic deposit side, there can be upside due to lower discretionary spending.
(UNI)
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