Bank Credit Soars 11.38% Amid GST Cuts and Festive Demand
In a remarkable turn of events, bank credit in India has surged by 11.38% in just 14 days, as per the latest data from the Reserve Bank of India (RBI). This growth, the fastest in over eight months, comes as a result of the recent Goods and Services Tax (GST) rate cuts and heightened consumer demand during the festive season. By October 3, 2025, loans disbursed by banks reached an impressive Rs 192.66 lakh crore, significantly up from Rs 172.98 lakh crore in the same period last year.
The government’s decision to simplify the GST structure from September 22 has played a pivotal role in this growth. By abolishing multiple GST rates of 5%, 12%, 18%, and 28%, and replacing them with a two-slab system of 5% and 18%, the government has effectively encouraged consumer spending. Experts from Bank of Baroda noted that there was pent-up demand, as many consumers had held off on spending until the new GST structure was implemented.
Moreover, inflation appears to be trending downwards, with the Consumer Price Index (CPI) inflation falling to an eight-year low of 1.54% in September, down from 2.07% in August. This decline is expected to increase consumers' real disposable income, allowing them to spend more freely. The tax relief provided in the recent budget is anticipated to further support spending, particularly in the latter half of the year as savings from tax reductions begin to accumulate.
In addition to the growth in credit, bank deposits also saw a substantial increase of 9.94%, reaching Rs 240.98 lakh crore in the same fortnight. This growing deposit base indicates heightened consumer confidence and willingness to engage with the banking system, which can lead to more robust economic activity.
Overall, the combination of GST reforms, low inflation, and tax relief measures has set a positive tone for the Indian economy, particularly during the festive season when consumer spending typically peaks. As banks continue to support this demand through credit, the economic outlook remains optimistic.
