CD ratio of Indian banks lower compared to global peers, says MPC’s Ashima Goyal

Goyal added that the issue of non-performing assets (NPA) rising in some personal credit, may see tightening of risk weights for particular areas where there seems to be too much exuberance.

The credit-deposit (CD) ratio of Indian banks is lower compared to global banks, Ashima Goyal, an external member of the Reserve Bank of India's Monetary Policy Committee (MPC) said.

“Overall, in India, credit-deposit ratios are much lower than in many countries across the world. Exposure of households and firms is much below that in other countries while our governments tend to borrow more,” Goyal said at the Global Fintech Fest on August 29.

Last month, RBI Governor Shaktikanta Das, in an event in Mumbai, raised concerns over the widening gap between credit and deposit growth, saying it will expose the system to structural liquidity issues.

Das further said that there could be a debate regarding ‘deposits funding loans’ vs ‘loans funding deposits’. The current regulatory concern stems from the fact that there could be structural changes happening that banks need to recognise, and, accordingly, devise their strategies.

Goyal added that the issue of non-performing assets (NPA) rising in some personal credit may see tightening of risk weights for particular areas where there seems to be too much exuberance.

“The NPAs that have happened recently, they are not so worrying as had happened earlier in the 2010s. It's very different. Today, the exposures that are rising are very small. They're not giant exposures to big companies that are doing infrastructure,” Goyal added.