Banks trim gilts to power loan growth as deposits slow down

ments to fund credit growth when deposit growth has not kept pace," said Madan Sabnavis, chief economist at Bank of Baroda.

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Sabnavis said a clutch of lenders has been liquidating SLR investments in the past, at least for FY25. "We found instances when we look at the investment portfolio and lending portfolio of some banks," he said.

According to Sabnavis, one reason bank investments in government securities have not grown at the same pace as before could be that there had been open market operations (OMO) in the beginning of the financial year for a couple of months. Under OMO, the central bank infuses liquidity in exchange for government securities from banks. "Since banks had surplus SLR, they obviously did extinguish these securities," he said.