India’s banking system is witnessing rising pressure as the credit-to-deposit (CD) ratio has reached a record high. As of December 31, 2025, banks are lending much faster than they are mobilising deposits. This trend signals robust loan demand but also raises concerns about liquidity management and long-term funding stability in the banking sector.
Why in News?
Indian banks credit to deposit ratio touched an all-time high of 81.75%. The rise reflects strong credit growth but slower deposit mobilisation, as per RBI data.
About Credit to Deposit (CD) Ratio
- The credit-to-deposit ratio measures how much banks lend compared to the deposits they collect.
- A CD ratio of 81.75% means banks lend ₹81.75 for every ₹100 deposited.
- While there is no official cap, the Reserve Bank of India advises banks to maintain sufficient liquidity buffers.
- A very high ratio may strain liquidity, while a very low ratio may indicate inefficient use of funds.
Reason for CD Ratio Record High
- The record CD ratio reflects credit growing faster than deposits. In 2025, bank credit grew by 11.4%, while deposits increased by only 10.1%.
- Outstanding deposits stood at about ₹248.5 lakh crore, while credit reached nearly ₹202 lakh crore.
- Banks are deploying more funds for lending, even as deposit growth struggles to keep pace.
Role of Interest Rates
- Deposit mobilization has weakened as savers look for better returns outside banks.
- Small savings schemes currently offer around 7.10%, compared to 6.40–6.50% on bank deposits.
- After the RBI cut policy rates by 125 basis points since February 2025, banks reduced deposit rates.
- The weighted average rate on outstanding term deposits fell to 6.73%, discouraging fresh deposits.
Liquidity Rules and Lending Constraints
- Out of every ₹100 in deposits, banks must keep aside money for Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Liquidity Coverage Ratio (LCR) requirements.
- After meeting these norms, only about ₹75 – 76 is available for lending.
- A CD ratio above this level indicates banks are stretching available resources, increasing liquidity sensitivity during stress periods.
Expert Views and Outlook
- Experts from institutions like CARE Ratings believe banks will diversify funding sources as loan demand stays strong. Economists also point out that a high CD ratio shows efficient use of resources, since it is calculated after meeting regulatory liquidity norms.
- The ratio may moderate as RBI liquidity infusion boosts reserve money growth and deposit mobilisation improves.
Why This Matters for the Economy
- A high CD ratio reflects a credit-driven growth environment, supporting investment and consumption.
- However, sustained pressure on deposits could raise funding costs and affect financial stability.
- Balancing loan growth with deposit mobilization is crucial for ensuring healthy banking sector expansion.
Key Summary at a Glance
| Aspect | Details |
| Why in News? | CD ratio hit record 81.75% |
| Indicator | Credit to Deposit Ratio |
| Data Source | RBI |
| Credit Growth (2025) | 11.4% |
| Deposit Growth (2025) | 10.1% |
| Key Concern | Liquidity pressure |
Question
Q. What does a credit-to-deposit ratio of 81.75% indicate?
A. Banks are holding excess liquidity
B. Banks are lending most of their deposits
C. Deposits are growing faster than credit
D. RBI has imposed a lending cap
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