lent for every ₹100 of new deposits, September 2021 to March 2026
Banks lent ₹102 for every ₹100 of new deposits
Indian banks' credit-deposit ratio reached 82.2% in March 2026. Loans have grown faster than deposits since FY2023, and some worry that banks will run short of money to lend.
An RBI Bulletin article from September says that worry misreads how banks work. Key takeaways from the RBI article:
1. Banks do not wait for savings before they lend. When a bank makes a ₹100 loan, it adds the same amount to the borrower's account. The loan creates the deposit.
2. When loans are in demand, banks buy fewer bonds. From September 2021 to March 2026, banks lent ₹102.2 for every ₹100 of new deposits and put only ₹24.7 into investments, mostly government bonds. In the slow years of 2019 to 2021, that was ₹39.8.
3. Profits helped pay for it. Banks kept more of what they earned as interest, so capital added ₹15.5 per ₹100 of new deposits, up from ₹11.7 in 2002 to 2008. Return on assets rose from 0.1% in 2020 to 1.3% in 2026.
4. Some deposits also leak out. The cash that people withdraw leaves the banks, and cash with the public is now about 15% of deposits. When insurers and mutual funds buy government bonds, their deposits sit in the government's RBI account until it spends. These non-banks now hold more government bonds than banks do.
5. So a high ratio alone isn't a red flag. Bad loans are down to 1.8%, and banks have about 125% of the cash they would need to get through a 30-day stress. The real thing to watch is where that extra money is coming from and whether it is sustainable for the banks in the long run.
Banks lent ₹102 for every ₹100 of new deposits
Where each ₹100 of new bank deposits went, Sep 2021 to Mar 2026. Capital, borrowing and fewer bonds paid for the extra loans.
RBI Bulletin, September 2026, Credit-Deposit Divergence, Table 3 and Annex Table 2 · Sep 2021 to Mar 2026