RBI officials noted that banks are increasingly relying on certificate of deposits (CDs) to meet funding needs
Scheduled commercial banks (SCBs) credit growth dropped below 10 per cent as on May 30, 2025, moderating to 9.9 per cent from 16.2 per cent a year ago due to weaker momentum as well as unfavourable base effects, according to RBI’s latest monthly bulletin.
Deposit growth (excluding the impact of the merger of HDFC with HDFC Bank) of these banks decelerated from 10.6 per cent, as on March 21, 2025 to 10.1 per cent, as on May 30, 2025, with the base and momentum effects offsetting each other.
In an article on the “State of the Economy”, published in the bulletin, RBI officials noted that banks are increasingly relying on certificate of deposits (CDs) to meet funding needs as competition intensified in the bulk deposit space.
Credit growth in April 2025
The officials observed that average bank credit growth to various sectors of the economy softened significantly during the period April 2024 to April 2025.
“Growth in non-food bank credit declined to 11.2 per cent during the fortnight ending April 18, 2025, from 15.3 per cent during the corresponding fortnight of the previous year. This was primarily driven by a moderation in growth of credit to services sector and agriculture and allied activities,” per their assessment.
Personal loans growth also showed deceleration over a year ago, though on a sequential basis, it witnessed an uptick after witnessing a softening in the last four months.
Assessment of rate cuts during Feb-Apr
The 50-basis points (bps) cut in the policy repo rate during February-April 2025 reflected in banks’ repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rate (MCLR).
Consequently, the weighted average lending rate (WALR) on fresh and outstanding rupee loans of SCBs declined by 6 bps and 17 bps, respectively, during the period February-April 2025.
On the deposit side, the weighted average domestic term deposit rates (WADTDRs) on fresh and outstanding deposits moderated by 27 bps and 1 bp, respectively, during the same period.
During the current easing cycle (February-April 2025), the decline in the WALR on fresh rupee loans was marginally higher for public sector banks (PSBs) as compared to private sector banks (PVBs).
For outstanding loans, the transmission was higher for PVBs. In case of deposits, PSBs reduced their fresh term deposit rates by a higher magnitude as compared to PVBs.
Published on June 26, 2025
