Banks slow g-sec investment to Rs 70.9 lakh crore as credit growth outstrips deposits

With credit growth continuing to outstrip deposit growth, Indian banks have been going slow on their investments, which are largely in government securities. Bank investments stood at Rs 70.9 lakh crore at the end of the first quarter of FY27, with year-on-year investment growth moderating to 5.8%, compared with 8.7% growth in the preceding year.

The slowdown comes even as banks recorded a sharp fortnightly deposit surge of about Rs 7 lakh crore, or 2.7%, in the final fortnight of the quarter, taking aggregate deposits to Rs 265.4 lakh crore as on June 30, 2026. Year-on-year deposit growth for Q1FY27 rose to 13.3%, up from 10.1% a year earlier.

Bank credit, however, grew even faster. Credit stood at Rs 219.3 lakh crore as on June 30, 2026, after rising by Rs 3.8 lakh crore, or 1.8%, during the fortnight. On a year-on-year basis, credit growth accelerated to 18.6%, nearly double the 9.5% growth recorded in June 2025 — leaving banks with less room to expand their securities holdings even as deposits picked up.

The deposit surge followed a weak start to the quarter. Growth in the first three months was just 1.2%, or Rs 3.1 lakh crore, because deposits had shrunk earlier in the quarter — as of the fortnight ended June 15, 2026, deposits were down Rs 3.9 lakh crore, or 1.5%, from end-March 2026 levels.

Soumya Kanti Ghosh, chief economist at SBI, said in a report that beyond routine quarter-end deposit mobilisation, the surge also reflects a jump in capital flows through channels such as FCNR(B), external commercial borrowings and the Overseas Foreign Currency Borrowing route, with an informed estimate of overall capital flows, after stripping out trend growth, put as high as $15 billion.