Bank credit-to-deposit ratios persist below the 80% mark, reflecting a decrease in credit demand, according to recent reports.
In the current fortnight, deposits have been outpacing credit offtake, leading to a narrowing of the credit-deposit gap in Indian banks. This trend has kept the credit-to-deposit ratio (CDR) below 80%, as predicted for 2025.
Slower credit growth is a key factor contributing to this trend. Total bank credit grew around 10.0% year-on-year by July 2025, down from 15.1% growth the previous year. This slower credit expansion is due to a high base effect from previous years and muted demand across sectors.
Deposits, on the other hand, grew by 10.2% year-on-year, slightly faster than credit growth, keeping the CDR below 80%. Banks have been more risk-averse, especially in retail loans and unsecured credit, due to an uptick in delinquencies and credit risk concerns.
The shift to alternative investments is another factor affecting the credit-deposit dynamics. Emerging investment options offering better returns than traditional fixed deposits reduce the portion of funds parked in deposits. Sectoral credit demand has also slowed, with lending to corporates and capital markets remaining subdued due to tight liquidity and weak private investment.
Since FY22, deposit growth has been lagging credit growth on average, but recent trends suggest an easing, with deposits slightly gaining relative share. Despite the sequential improvement in both credit and deposits, the overall pace remains slower than last year.
As of July 25, 2025, credit offtake stood at ₹185.0 lakh crore, reflecting a 10.0% year-on-year (y-o-y) growth. However, this growth rate is slower compared to the 15.1% growth recorded in the same period last year. Time deposit growth also slowed from the 10.9% growth seen in the same period last year.
The government's Investment-to-total-assets ratio stayed flat at 26.2 per cent. Overall government investments stood at ₹67.3 lakh crore as of July 25, 2025, marking a 6.5 per cent y-o-y growth and a 0.2 per cent rise sequentially. Deposits rose by 10.2% y-o-y to ₹233.5 lakh crore in the same period.
Demand deposits registered a sharper increase, rising 17.7 per cent y-o-y to ₹28.7 lakh crore. Time deposits to others grew by 9.2 per cent y-o-y to ₹204.7 lakh crore.
The report outlines that the overall credit-to-deposit ratio remains below the 80 per cent mark, attributing the slowdown in credit offtake to a high base effect and muted growth across segments. The moderation in deposit growth is primarily due to an unfavourable base effect, deposit repricing, and an increase in alternative investment opportunities.
In summary, the credit-to-deposit ratio remains below 80% because loan growth is cautious and slower than deposit growth, driven by risk aversion from banks, subdued demand from borrowers, sector-specific slowdowns, and competition from alternative financial products.
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