Indian lenders' loan growth picks up pace in December quarter

Nifty Bank index rose 0.13% on Monday, against muted broader markets. The index has gained more than 10% since October, compared to a 7% rise in the benchmark Nifty 50.

• HDFC Bank and Bank of Baroda saw improved loan growth in the December quarter
• Festive spending and tax cuts boosted credit demand in India
• Loan growth exceeded deposits, raising the loan-to-deposit ratio to a record high.

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Indian lenders such as HDFC Bank and Bank of Baroda logged improved loan growth in the December quarter, data showed, signalling a rebound in demand for credit in the world's fastest-growing major economy.

Loan growth had slowed sharply in mid-2025 due, in part, to stricter regulations, but recovered strongly since then, with analysts citing festive period spending and the government's consumption tax cuts among factors pushing up growth.

Growth in bank credit decelerated to 9.9% on-year in the quarter ended June, data from central bank reports showed, from 11.1% in the quarter ended March. It grew 11.5% year-on-year in November, the latest monthly data available.

"Overall systemic credit growth is showing signs of improvement, at 11.4% year-on-year now from a low of about 9% in May 2025," said brokerage Emkay in a note.

Within retail credit, secured gold loans and vehicle financing are emerging as key growth engines for now, Emkay added.

India's Nifty Bank index rose 0.13% on Monday, against muted broader markets. The index has gained more than 10% since October, compared to a 7% rise in the benchmark Nifty 50.

Gross loans at HDFC Bank, India's top private lender, rose 11.9% on-year in the December quarter, outpacing growth of 9.9% and 6.7% in quarters ended September and June, respectively.

The bank merged with its parent HDFC in July 2023, adding a significant pool of loans but a smaller volume of deposits. This created pressure for the lender to either raise deposits or ease loan growth.

State-run Bank of Baroda (BOB) posted a 14.6% on-year rise in global advances as of December quarter-end, faster than the 11.9% rise as of September quarter-end. It had logged a 12.6% growth at the end of the June quarter.

Smaller peers CSB Bank reported a 29% on-year increase in gross advances in the reported quarter, while AU Small Finance Bank's loans were up 24% in the same period.

Other marquee names such as ICICI Bank, Axis Bank and State Bank of India are yet to report numbers.

Loan growth has risen, but deposit growth has not kept pace, analysts pointed out.

"Loan growth and deposit growth gap is widening again... and loan-to-deposit ratio (LDR) at 81.6% is now at an all-time high," said Macquarie Research.