SBI Research report indicates a strong start to FY27. A surge in capital inflows, record growth in deposits and a surge in credit are signs of better-than-expected growth in the economy. Softening of crude oil prices is a big positive factor.
India’s banking system and credit markets are indicating a strong start to the financial year 2027 (FY27). SBI Research in its report said that strong capital inflows, high growth in deposits and a pick-up in both commercial paper and bank credit are early indications that economic growth in the first quarter of FY27 (Q1FY27) has been better than expected.
SBI Research report expects that this momentum will continue throughout the quarter. The report cited soft crude oil prices as a major supporting factor.
“The average crude oil price for the Indian basket is now expected to be $80 per barrel, which will lead to savings of $30 to $35 billion in oil import bill compared to our previous estimate when oil prices had crossed $130 per barrel.”
The report also said the rupee’s outlook “remains positive” despite a recent 0.4% decline amid geopolitical tensions.
Record growth in deposits and capital inflows
In the fortnight ended June 30, 2026, total deposits increased by nearly Rs 7 lakh crore, the “third largest fortnightly increase in 29 years”. Even if the quarter-end impact of Rs 3.5-4 lakh crore is removed, the surge reflects strong capital inflows, SBI Research said.
“An estimate of the magnitude of overall capital flows, excluding trend growth, suggests that the figure could be $15 billion.”
The report attributes part of this to FCNR(B), ECB and OFCB flows and notes that India has received “FII inflows of $7 billion since the measures announced by the government to bring in foreign inflows and boost the rupee”. Cumulative debt FAR flow stands at $2.7 billion.
RBI’s foreign exchange assets increased by $4.4 billion to $545.6 billion during the fortnight.
Credit activities also increased
Credit activity has also increased. Commercial paper (CP) issuance stood at Rs 5.38 lakh crore in Q1FY27, up 19% year-on-year, with the June figure at a 55-month high of Rs 2.55 lakh crore. Incremental bank credit increased to Rs 5.6 lakh crore in Q1FY27, compared to Rs 2.4 lakh crore a year ago.
SBI Research believes that “bank credit and CP issuances are moving in the same direction – a sign of economic strength.” Top CP-issuing sectors like power, real estate and steel also showed high bank credit growth, and these sectors together “account for ~69% of new projects announced in Q1”.
On the rates front, long-term G-Sec yields rose faster than corporate bonds on foreign inflows in May-June, while 3-year AAA saw better demand. The spread between CP weighted average yields and bank lending rates narrowed to 115 bps in May 2026 from 169 bps in March.
With liquidity conditions expected to be comfortable given growth in deposits and oil savings, SBI Research expects funding conditions to further ease in the coming months, supporting both corporate lending and project execution.
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