Loan growth picks up at Indian banks in December quarter

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

Overall loan growth had slowed sharply in mid-2025 due in part to stricter regulations, but recovered strongly since, 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% year-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% in November, the latest monthly data available showed.

“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.

Read more: Indian banking sector resilient, bad loans decline to multi-decade low, RBI report says

Since October, the Nifty Bank index gained more than 10%, while the broader benchmark Nifty 50 rose 7%. On Monday, the banking sub-index gave up initial gains to close 0.2% lower, against a 0.3% drop in Nifty 50.
Gross loans at HDFC Bank, India’s top private lender, rose 11.9% 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.

Kotak Mahindra Bank reported a 16% rise in net advances for the quarter ended December 31 - its fastest growth so far in the current financial year. State-run Bank of Baroda’s loan growth also rose, with global advances rising 14.6% as of December-end, up from 11.9% at the end of September and 12.6% at June-end.

Smaller peers CSB Bank reported a 29% increase in gross advances in the 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 and deposit growth gap is widening again… and loan-to-deposit ratio at 81.6% is now at an all-time high,” said Macquarie Research.

A persistent gap can inhibit banks’ ability to cut deposit rates, the brokerage said.