RBI Rate Cuts Trigger Cooling in Credit Offtake and Deposit Growth: CareEdge Report

New Delhi, July 3, 2025 — A recent report by CareEdge has revealed that the Reserve Bank of India’s (RBI) cumulative 100 basis point repo rate cut since February 2025 has led to a noticeable deceleration in both credit offtake and deposit growth across the banking sector.

Deposit Growth Slows but Still Outpaces Credit Demand

Despite the reduction in deposit rates by banks, deposit growth continues to surpass credit offtake in the current fortnight. As of June 13, 2025, deposits contracted by 0.44% sequentially, standing at ₹230.7 lakh crore. This compares unfavorably with the 12.1% growth recorded a year earlier (excluding merger effects), indicating a slowdown in fresh inflows.

The report attributes this decline to increased reliance on certificates of deposit by banks to fulfill their funding requirements. Additionally, heightened competition in the bulk deposit segment has added further pressure on deposit mobilization.

Credit Offtake Growth Drops Sharply

Credit offtake reached ₹183.1 lakh crore, marking a 9.6% year-on-year increase. However, this pace is significantly lower than the 15.5% growth recorded during the same period last year. The moderation is being linked to a high base effect and subdued performance across segments, including the retail lending space.

Liquidity Infusion Reflects in Market Rates

Following the RBI’s rate cuts and liquidity easing measures, the short-term Weighted Average Call Rate (WACR) dropped to 5.27% as of June 20, 2025, from 6.68% a year earlier. This reflects the central bank’s efforts to boost liquidity within the financial system.

CD Ratio Rises Marginally Amid Deposit Outflow

The Credit-Deposit (CD) ratio saw a slight uptick but remained below the 80% mark for the sixth consecutive fortnight. The increase was largely driven by deposit outflows against a credit offtake rise of ₹0.59 lakh crore in the latest fortnight.

Asset Ratios Reflect Market Softening

• The credit-to-total-assets ratio saw a minor decline to 69.4%.
• Government investment-to-total-assets ratio also edged down to 25.3%.
• Government investments, at ₹66.9 lakh crore, showed a 7.4% year-on-year growth but slipped 0.2% sequentially.

The latest report from CareEdge points to a broader slowdown in financial activity, even as the RBI has eased policy rates. Deposits continue to grow faster than credit demand, while short-term interest rates are falling and banks are adjusting their asset mix.

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