India's money market hits ₹5.5 trillion as credit outpaces deposits
India's money market just broke records, with banks borrowing big to keep up with a surge in people and businesses wanting loans.
On May 13, transactions in the main segment hit ₹5.5 trillion ($57.8 billion), and they've stayed high since.
The catch? Credit demand has been outpacing deposit growth for eight months straight.
Private banks become lenders in May
Bank lending grew 16.2% year over year, the fastest in two years, widening the gap between credit and deposit growth to its biggest point in two years (400 basis points).
State-owned banks are borrowing more to fund sectors like power and data centers.
Meanwhile, overnight borrowing costs and short-term bond yields are climbing because banks can't attract enough deposits. Many households are putting their savings elsewhere.
Private banks have even switched from borrowers to lenders in May, possibly reacting to fears of rate hikes tied to currency defense, said Axis Bank economist Tanay Dalal.