MUMBAI: A New Horizon for Bank Credit Growth

According to the Reserve Bank of India (RBI), there exists a significant scope for bank credit to outpace the growth of the economy. This is attributed to the relatively low share of credit to GDP in India. The RBI's report on the Trend and Progress of Banking in India highlights that India's total credit-to-GDP ratio, including credit extended by banks as well as NBFCs, stood at 90.1% in 2022. This figure is below that of advanced economies, emerging market economies (EMEs), and the estimated threshold of 113.1%.

The report further includes a cross-country analysis of the credit-to-GDP ratio, concluding that higher credit growth in India remains supportive of economic growth. Additionally, a separate analysis on deposits has concluded that income growth has a significant positive impact on bank deposits.