Credit continues to beat deposit growth, PSU banks proforma numbers show

Core Insights - The banking sector in India is experiencing a significant credit growth, with a notable increase in loans outpacing deposit growth, indicating a persistent credit-deposit gap [10][8]. Group 1: Credit and Deposit Growth - Punjab National Bank reported deposits of ₹15.97 lakh crore, an increase of 8.32% year-on-year, while gross advances grew by 10.15% to ₹11.67 lakh crore [1]. - Bank of India and Indian Bank exhibited double-digit growth in both deposits and advances, with loans increasing by 15.07% and 14.5%, respectively, compared to deposit growth of 12-13% [1]. - The overall credit growth for a coverage universe of 17 banks is projected to rise to 11.8% year-on-year, while deposit growth is expected to be lower at around 10.2% [2]. Group 2: System Credit Trends - The credit cycle has seen a meaningful pickup following GST rate cuts, with system credit growth tracking above 11% in October and November 2025, driven by a consumption-led recovery [5]. - System credit growth is anticipated to remain above 12% year-on-year in FY26 and improve to around 13% in FY27, up from 11-12% in FY25 [6]. - Recent data indicates that for the fortnight ending December 12, bank loans rose by 11.5% year-on-year, while deposits grew at a slower pace of 10.2% [8]. Group 3: Regulatory Environment and Market Dynamics - The Reserve Bank of India (RBI) announced a phased cut in the cash reserve ratio (CRR) by 100 basis points to 3%, which is expected to support credit expansion [7][6]. - Competitive pressure on deposits remains, with banks facing challenges in mobilizing low-cost funding, although ongoing term-deposit repricing may moderate the cost of funds [9]. - The RBI also cut the key repo rate by 25 basis points to 5.25% in December, maintaining a neutral stance to bolster growth amid low inflation [9].