Indian banks` high CD ratio likely to curb loan growth in near future: India Ratings
A domestic rating agency -- India Ratings and Research has said that deposit accretion has become a structural concern for Indian banks, and the ensuing high credit deposit (CD) ratio likely to also constrain loan growth in the near future. The agency maintained a neutral outlook on the banking sector for FY27, and stated that loan growth, which supports overall GDP, is expected to be 13 per cent in the next fiscal year.
Its head for financial institutions, Karan Gupta said elevated credit–deposit (CD) ratios remain a constraining factor for the banking system at 81.9 per cent in the first half of FY26, limiting loan growth in FY27 to 13 per cent. Referring to the low deposit growth in the system, the agency said deposit accretion is a structural concern. The agency noted that over the two years ending June 2024, advance growth consistently outpaced deposit growth by an average of 6.5 per cent, leading to tight liquidity in the system and elevated CD ratios.
From April 2025, the RBI has consistently tried to revive the economy and recent trends are suggesting a buoyant recovery environment for FY27, with a revival in lending to non-bank finance companies (NBFCs) and the retail sector, in addition to a lower yield curve supporting corporate disbursements. However, the agency said that the elevated CD ratio is still a major problem for the banking system and may increase to 83.2 per cent in FY27, potentially constraining incremental growth.
