04/06/2026
Driven by aggressive lending by state-owned banks and robust credit demand across the economy, trading activity in India’s money market has surged to an all-time high.
Data shows that triparty repo transactions, which account for around 70% of India’s overall money market turnover, peaked at a record ₹5.5 trillion (US$57.8 billion) on May 13 and have remained at elevated levels since then.
Despite an energy crisis stemming from the Iran-U.S. conflict, India’s economy has maintained solid growth momentum, sustaining strong credit appetite across sectors. State Bank of India Chairman C.S. Setty stated on Wednesday that robust loan demand is being witnessed across multiple segments, including power, renewable energy and data centers.
In recent weeks, however, massive capital inflows have pushed up overnight borrowing costs and short-term bond yields, highlighting persistent deposit challenges for Indian banks, as household savings continue to shift toward alternative investment instruments.
Kanika Pasricha, Chief Economist at Union Bank of India, noted that the money market has become the cheapest funding avenue for banks amid rising overall funding costs.
Latest Reserve Bank of India data reveals that bank loan growth stood at 16.2% year-on-year as of May 15, marking the fastest expansion in two years. Credit growth has outpaced deposit growth for eight consecutive months, widening the credit-deposit gap to around 400 basis points, the largest margin in nearly two years.
An analysis by the Clearcorp also points to a notable shift in market dynamics alongside the rally in money market volumes. Private sector banks, traditionally net borrowers in the money market, turned net lenders in May, marking a rare reversal of their usual positioning.
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