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Informist, Friday, Jul. 10, 2026

 

MUMBAI – India's economic growth may have exceeded expectations in the June quarter, supported by a sharp rise in bank credit and commercial paper issuances, while robust foreign capital inflows have boosted banking system deposits and strengthened the country's external position, according to a research report by State Bank of India on Friday.

 

The report said the simultaneous expansion in commercial paper issuances and bank lending suggests that economic activity remained resilient during the first quarter of the fiscal year despite global uncertainties. 

 

Overall deposits in the banking system jumped by around INR 7 trillion in the fortnight ended Jun. 30, marking the third-highest fortnightly increase in 29 years, SBI Research said. While nearly INR 3.5 trillion – INR 4 trillion of the increase could be attributed to typical quarter-end deposit mobilisation, the report said the remaining surge appeared to be driven by strong foreign capital inflows through Foreign Currency Non-Resident Bank deposits, external commercial borrowings, overseas foreign currency borrowings and portfolio investments. 

 

SBI Research estimated overall capital inflows, after adjusting for trend growth, at around $15 billion, adding that FCNR(B) deposits have gathered momentum following recent measures announced by the Reserve Bank of India and the government to attract overseas funds. Since those measures were introduced, India has received around $7 billion of foreign institutional investor inflows, while cumulative debt inflows through the Fully Accessible Route stood at $2.7 billion, the report noted. 

 

The surge in inflows also enabled the RBI to rebuild its foreign exchange reserves. Foreign currency assets rose by $4.5 billion during the fortnight ended Jul. 3, indicating the central bank's intent to replenish reserves even as capital flows strengthened. 

 

On the domestic credit front, the report highlighted that commercial paper issuance rose 19% on year to INR 5.38 trillion during the June quarter, with June issuances touching a 55-month high. Incremental bank credit during the quarter also more than doubled to INR 5.6 trillion, compared with INR 2.4 trillion in the corresponding period last year. According to SBI Research, the parallel increase in both market borrowings and bank credit points to sustained demand for financing and indicates that "the economy has continued to expand meaningfully." 

 

However, the report noted that nearly 76% of the outstanding commercial paper stock is scheduled to mature between July and September, creating a sizeable refinancing requirement over the coming months. 

 

The report further suggested that liquidity conditions could improve in the banking system following the sharp increase in deposits. Banks had raised certificate of deposit issuances by 32% on year during the first quarter to meet funding requirements, but SBI Research expects this trend to reverse as surplus liquidity strengthens.

 

Despite the recent volatility, SBI Research retained a constructive outlook, forecasting the average price of the Indian crude oil basket at around $80 per barrel or lower. Such a price trajectory could reduce India's oil import bill by $30 billion-$35 billion compared with earlier estimates made when crude prices had exceeded $130 a barrel, providing additional support to the country's macroeconomic fundamentals.  End

 

US$1 = INR 95.33

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Kabir Sharma

Edited by Avishek Dutta

 

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