Indian banks’ credit deposit (CD) ratio stood at a 62-year high of 82.6% in the first quarter (Q1) of fiscal 2027 as loans grew faster than deposits, according to data from the Centre for Monitoring Indian Economy (CMIE). 

Loans grew at 18.6% year-on-year (YoY) to ₹219.3 lakh crore, while deposits rose 13.3% YoY to ₹265.4 lakh crore in the reporting quarter. The variance between the loan and deposit growth was at 5 percentage points – widest since June quarter of fiscal 2024.

Loans grew atleast 8.5% in most quarters on a yearly basis since the June quarter of 2022. Deposits however did not grow faster than 16% in the same period. Analysts say that it (CD ratio) has more to do with the change in the composition of the liabilities. 

“Over the last five years, banks had  excess investments on their balance sheet, which they have redeployed into loans. So optically, the loan book is growing faster and the investment book is growing slower, therefore the CD ratio looks higher. Second, the bank’s capital is at life time highs and this also gets lent out,” said Piran Engineer, Senior Research analyst at CLSA India, a registered institutional brokerage firm.

While top executives of banks claim that households preferred bank deposits over mutual funds and similar avenues, industry insiders reject the argument. Investment preferences are shifting, and these outcome are likely due to a low interest rate regime. Customers would turn back to banks for deposits once rates increase, say insiders.

However, Mr. Engineer said that the financialisation argument applies only for retail deposits and not total deposits. The net effect of buying and selling in the capital market is zero, as cash is just transferred from the buyer to the seller’s account having no effect on overall liquidity.