Banks are seeing strong credit growth while deposits are lagging behind at a time when the Reserve Bank of India (RBI) has been raising interest rates.

Bank loans surged 17.9% in the two weeks to 21 October from a year earlier.

Deposits, on the other hand, rose 9.5%, the RBI’s weekly statistical supplement showed on Friday.

Outstanding loans rose Rs 290.86 billion ($3.54 billion) to Rs 128.89 trillion in the two weeks to 21 October.

Non-food credit rose Rs 240.65 billion to Rs 128.63 trillion, while food credit rose Rs 50.21 billion to Rs 256.55 billion.

Bank deposits fell Rs 601.16 billion to Rs 172.04 trillion in the two weeks to 21 October.

Loans in the festive month of September saw a rise across categories, indicating a revival in consumer demand during this period despite higher borrowing costs.

Retail loan jumped 20% in September, the fastest since Covid-19 broke out in 2020. Credit growth was seen across categories for purchases of vehicles, consumer durables and homes.