Credit Offtake of Scheduled Commercial Banks Grows 9.9% in Q1 FY26, Driven by PSBs

Scheduled Commercial Banks (SCBs) achieved a year-on-year growth of 9.9% in credit offtake in the first quarter of FY26, a report announced on Thursday stated.

Care Edge Ratings observed that growth was driven primarily by strong demand in housing, gold loans, and auto finance. The MSME business also contributed significantly, growing 19.3% in Q1 FY26. But this was partially offset by weaker growth in agriculture (6.8%), industry (5.5%), and services (9.6%).

The report pointed out that public sector banks (PSBs) have recorded higher credit growth compared to private sector banks (PVBs) for the last three quarters. This was due to PSBs enjoying more lending capability and healthier credit-to-deposit (CD) ratios than their private sector counterparts.

Regionally, the northeast leading the pack with a year-on-year credit growth of 13.7%, while rural areas experienced the highest rate of expansion across segments at 12.8%.

On the lending front, credit outstanding in June increased sharply in the 7–8% interest category to ₹33.1 lakh crore from ₹20 lakh crore a year ago. Loans in below 6% interest categories also increased substantially to ₹18.3 lakh crore from ₹5.3 lakh crore. High-yielding loans of above 11% declined to ₹27 lakh crore from ₹30.3 lakh crore, indicating that banks are opting for mid-yield lending and reducing exposure to higher-risk segments.

Deposits have left credit growth in the dust in the period, rising 10.9% year-on-year, propelled by aggressive mobilization drives by private banks and good schemes on deposits. In absolute terms, deposits increased by ₹22.6 lakh crore till June 2025.

With deposits growing faster, the CD ratio slipped by 78 basis points to 79.6% at the end of June 2025, compared with 80.4% a year earlier. The narrowing gap between credit and deposit growth has been aided by better liquidity conditions, helped in part by the Reserve Bank of India’s recent rate cuts, the report added.