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Deposits witnessed an increase at both the largest 25 banks by assets and at small and mid-sized banks as well.

Fall In Lending: Meanwhile, banks' lending to businesses and consumers rose fractionally compared to a week earlier with $12.07 trillion in loans outstanding as the month neared its end, the report said.

While loans for both commercial and residential real estate, and for commercial and industrial loans, fell marginally, the declines were compensated by a rise in consumer loans led by credit card balances, it said.

Overall credit from U.S. banks fell by a record of over $120 billion in the latest week, on a non-seasonally adjusted basis, the report said. However, this was largely the result of banks divesting $87 billion in securities to non-banks, such as hedge funds, it added.

The Federal Reserve said banks had offloaded that amount of assets in each of the two latest weeks, most of it coming in the form of treasuries and mortgage-backed securities.

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