The deposit debate's blind spot

India's banking debate has increasingly narrowed to a single number: the credit-to-deposit (CD) ratio. But that number tells only a part of the story. CD ratio rose from 68.6 per cent in September 2021 to 82.2 per cent in March 2026, and has been read as evidence that banks have lent too much while failing to mobilise enough deposits.

The warning is simple: credit has run ahead of savings, and banks may hit a funding constraint. But that diagnosis does not fit the rest of the evidence. The banking system is healthier than it has been in years, with gross bad loans at 1.8 per cent, capital adequacy at 17.7 per cent and liquidity coverage well above the regulatory floor. The CD gap also looks less alarming in rupees than in growth rates. For instance, Rangarajan and Sambamurthy (businessline, August 19) noted the annual difference between credit and deposit accretion has mostly been modest, around ₹1-3 lakh crore in years when credit exceeded deposits, barely 1-1.5 per cent of the deposit base.