India’s high credit-deposit ratio: Is the banking system overstretched or just efficient?

Subscribe to enjoy similar stories. The credit-deposit (CD) ratio of scheduled commercial banks reached 81.75%—the highest level recorded since 2000-01—on 31 December 2025. Usually, a high CD ratio is a positive indicator as it means that banks are deploying funds efficiently in loans.

CD ratios rise when credit is booming, and economic activity is picking up. Yet, in the past, the Reserve Bank of India (RBI) has warned banks about excessively high CD ratios, though it does not recommend an ideal level. Are CD ratios too high, and why does it matter in the current context? To unpack the concept of CD ratio and its significance, it is useful to look at trends in granular data and in the balance sheet components that make up the ratio.

Disaggregating data by bank group shows that over the last two decades, CD ratios of private sector banks have been higher than those of public sector banks (PSBs). The gap has widened in recent years. This divergence in CD ratios is largely due to differing credit and deposit profiles of private and public sector banks.

Private banks tend to be more aggressive in building loan books as well as in mobilizing fresh deposits. During the past three financial years (2022-23 to 2024-25), deposits of PSBs grew at 8-9.5%, while credit grew at 12-14.5%. Both growth rates were within a tight range despite challenging domestic and external conditions.

In contrast, the deposit growth of private banks ranged from 12-20%, while the credit growth swung between 9.5% and 28%. As a result, the gap between credit and deposit growth was wider and more volatile for private banks, leading to higher CD ratios. PSBs have the added advantage of a sticky deposit profile: in March 2025, nearly 67% of their deposits