Mixed CD ratio trends in Indian banks raise concerns over uneven credit deployment, declining lending efficiency, and regional financial imbalance, as SLBC report highlights risks of both underutilized deposits and excessively high credit exposure in select banks.
Variations in lending behavior across banks have come under fresh scrutiny after the latest State Level Bankers Committee (SLBC) report highlighted uneven Credit-Deposit (CD) ratio trends over the past year, raising concerns about credit deployment efficiency and regional financial balance.
The 154th SLBC report, published by Punjab National Bank, examined CD ratio data of member banks from December 31, 2024 to December 31, 2025. The findings point to a mixed trajectory, where improvements in some institutions are offset by stagnation or decline in others, suggesting inconsistencies in how banks are channeling deposits into productive lending.
Among public sector lenders, Bank of Baroda showed moderate recovery, with its CD ratio rising from 54 in March 2025 to 62 by December 2025. However, the marginal gain compared to its 60 level in December 2024 indicates limited overall progress. In contrast, Bank of India witnessed a steady decline, with its CD ratio falling sharply from 80 to 60 over the same period, reflecting a slowdown in lending relative to deposit growth.
An outlier in the public banking space is Bank of Maharashtra, which recorded unusually high CD ratios, peaking at 195 in March 2025 before stabilizing at 180 by year-end. While elevated ratios typically signal aggressive credit expansion, such levels may also expose the bank to heightened risks, including potential asset quality concerns and over-leveraging.
On the other end of the spectrum, banks like Indian Bank (28), Central Bank of India (36), and Union Bank of India (33) continued to report persistently low CD ratios. These figures suggest underutilization of available deposits and a cautious or constrained lending approach, which could limit economic momentum, especially in sectors reliant on institutional credit.
Private sector banks also presented a mixed outlook. HDFC Bank experienced fluctuations between 55 and 64, ending the year at 60, while ICICI Bank maintained a comparatively strong position, consistently above 100 and closing at 107. Meanwhile, Bandhan Bank showed a declining trend, with its CD ratio dropping from 106 to 93, indicating moderation in credit growth.
A particularly striking case is IndusInd Bank, where the CD ratio surged from an already elevated 710 to 781 within the year. Such figures are significantly beyond industry norms and may prompt closer regulatory oversight to assess underlying risks and ensure prudent financial management.
Small finance and regional banks further reflected volatility in credit-deposit dynamics. Jana Small Finance Bank recorded a sharp jump from 39 to 140, highlighting rapid credit expansion, while ESAF Small Finance Bank saw its CD ratio decline from 324 to 237, indicating a contraction in lending pace relative to deposits.
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The broader implication of these trends is that despite healthy deposit mobilization across the banking system, the translation into credit growth remains uneven. This imbalance could affect economic activity, particularly in regions and sectors that depend heavily on bank financing for growth and investment.
Financial analysts suggest that policymakers and regulators may need to take a calibrated approach—encouraging banks with low CD ratios to expand lending while closely monitoring institutions with excessively high ratios. Ensuring a balanced and regionally inclusive credit flow will be essential to sustain economic growth and maintain financial stability in the coming years.
