New Delhi [India], November 25 : India's banking system continues to exhibit strong and predictable seasonal rhythms, with the financial year-end emerging as the most influential driver of banking activity, according to the Reserve Bank of India's latest bulletin.
The RBI study shows that March remains the dominant seasonal peak for a majority of banking variables, reflecting intensified financial operations as institutions close their books.
Bank credit, non-food credit and demand deposits see some of the sharpest year-end surges while the reserve money and narrow money (M1) also spike in March, highlighting elevated liquidity needs.
While most indicators peak in March, aggregate deposits, driven by time deposits, reach their seasonal high in April.
Further, the demand deposits recorded the highest volatility among banking indicators, with seasonal fluctuations of 5.5 percentage points in 2024-25.
One of the most notable trends is the widening seasonal fluctuation in banks' cash in hand and balances with the RBI, which hit a decade-high range of 8 percentage points.
This suggests sharper short-term liquidity adjustments during the year-end period.
Contrary to credit and deposits, banks' investments show a seasonal low in March and peak in September, indicating portfolio shifts aligned with regulatory and liquidity considerations.
Despite the pandemic-induced volatility in recent years, the RBI notes that banking sector seasonality has remained largely stable and predictable, with only a few indicators such as cash balances showing progressively wider swings.
The RBI Bulletin also highlighted the pattern in the Consumer Price Index (CPI).
It highlighted that the headline CPI peaks in October, falling to its seasonal low in March.
Vegetables especially tomatoes, onions and potatoes show the highest price volatility, contributing significantly to seasonal food inflation.
Further, the non-food categories such as clothing and housing recorded marginal seasonal effects.
Wholesale price indices also peak in November, though their seasonal variation remains comparatively mild.
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