Bank advances surged by over 100 per cent during the September–October 2025 period when compared with the same period last year as a combination of lower Goods and Services Tax (GST) rates and the Diwali festival triggered a sharp rise in consumer spending. Banks reported a significant jump in retail loans, particularly for vehicle purchases, consumer durables and personal-use goods.
Between September 5 and October 17, 2025, bank loans increased by Rs 4.1 lakh crore to Rs 192.192 lakh crore from Rs 188 lakh crore, according to the Reserve Bank of India’s (RBI) fortnightly data. During the coinciding festive period in the previous year, advances had increased by Rs 1.91 lakh crore to Rs 172.38 lakh crore in the fortnight ended October 18, 2024, from Rs 170.47 lakh crore during the fortnight ended September 6, 2024, the data showed.
The festive season, coupled with easier credit availability and improved consumer sentiment, encouraged households to spend more freely. The momentum is likely to continue into November as year-end offers and festival-linked promotions sustain demand across sectors, industry sources said.
On a year-on-year basis, bank credit rose by 11.45 per cent in the fortnight ended October 17, 2025, the highest in almost nine months. “The growth (in bank credit) was primarily driven by seasonal demand in the festive period and the unprecedented impact of GST rate cuts, especially on housing, automobiles, and white goods,” CareEdge Ratings said in a recent report.
The government implemented Next-Gen goods and services tax (GST) reforms effective September 22, with a simplified two-slab structure of 5 per cent and 18 per cent. The move has helped in spurring domestic demand in the festive season. “The GST cut came into effect from September 22. In the last week of September, we saw a steep increase in demand for vehicle loans because of GST rate reduction and due to festival-related purchases. Our bank registered a growth of over 25 per cent in the vehicle loan segment in Q2 (July-September 2025),” Canara Bank’s Managing Director and Chief Executive Officer K Satyanarayana Raju, told The Indian Express.
ExplainedKey question: Will demand sustain?
Besides vehicle loans, the bank recorded a stronger demand for loans in the micro, small and medium enterprises (MSME) sector, which grew by 12.7 per cent in the September 2025 quarter, he said. “We have observed that consumption has improved. If consumption improves, it impacts the MSME sector. The demand for production increases and hence the demand for credit in the MSME segment also rises,” Raju said.
Less than two weeks ago, at a joint conference by Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, and Information & Broadcasting Minister Ashwini Vaishnaw, the government’s message was that the benefits of GST rate cuts are reaching the end-consumers and these have resulted in higher purchases, which in turn, will be a driving force for investment.
The government is confident that higher consumption will add substantially to the GDP this year. “If we see last year’s GDP number (for India), the GDP size is Rs 335 lakh crore, out of which Rs 202 lakh crore is consumption and investment is of Rs 98 lakh crore. Consumption rises in a natural way every year as income grows, as country grows, but because of the GST reforms, consumption will be significantly increasing and it’s very likely that the consumption will increase more than 10 per cent this year, which means extra consumption is likely to be of Rs 20 lakh crore this year compared to last year,” Vaishnaw had said, later clarifying that the 10 per cent growth is anticipated in nominal terms.
Improved consumption to drive credit growth in H2
Analysts said that the growth in bank loans will continue to remain strong in the second half of the current fiscal, supported by GST cuts, relief in income tax announced in the Union Budget 2025-26, good monsoon and lower inflation.
Bank of Baroda’s economists, in a report released earlier this month, said that the third quarter of the year is likely to be exciting as festival season is expected to bring in a major revival. “There has been pent up demand which should materialize. In fact, a lot of spending was held back in the early part of September since the new structure of GST was to be applicable from 22nd of the month,” BoB’s economists said.
With prices of several commodities coming down by 10 per cent, the equivalent savings in the household budget will release funds for discretionary spending. Also, with inflation trending downwards, there will be an increase in real disposable income, which will result in higher spending, they said. Headline consumer price index (CPI) inflation moderated sharply to 1.5 per cent in September from 2.1 per cent in August, marking the lowest year-on-year rate since June 2017.
“We expect a robust offload of demand on account of increase in real purchasing power from lower inflation. This will contribute to higher sales; with sales of certain items likely to exhibit a strong double-digit momentum,” the economists said. Income tax relief given in the Budget should also help to prop up spending. While such benefits accrue over the year, savings in tax in the first 6 months should provide a boost in spending in the second half, they said.
THERE has been a
sharp rise in consumption demand, from electronics to consumer goods, and bank credit has also doubled in the last two fortnights — all spurred by the festive season. 
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