Credit Growth
The rate of increase in bank lending to the economy.
Formula
Credit Growth = (Current Outstanding Bank Credit - Year-Earlier Credit) / Year-Earlier Credit x 100
Unit
%
In depth
Credit growth is both a driver and a symptom: lending funds investment and consumption, and it also reflects confidence about the future. Its relationship with deposit growth matters, because credit growing much faster than deposits eventually forces banks to raise deposit rates or slow lending. Rapid credit growth is associated with later asset quality problems, since loans made in optimistic conditions are the ones that default — India's corporate lending boom of 2006 to 2011 produced the bad loan cycle that followed. Sustainable growth is usually described as running a few points above nominal GDP growth.
Worked example
Credit growing 16% against deposit growth of 11% cannot continue indefinitely. Banks must raise deposit rates to close the gap, which compresses margins and eventually slows lending.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Credit Growth” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.