Banks' credit-deposit ratio crosses 80% for first time: Report

Deposit growth has remained in single digits for four consecutive fortnights, while credit growth has stayed in strong double digits

Commercial banks are now operating with a credit-deposit (CD) ratio of 80.47% in the fortnight ended October 31 - the first time the system has crossed the 80% threshold, Business Standard reported. The rise comes even as lenders have stepped up their reliance on the Reserve Bank of India's liquidity windows, market borrowings, and funding from institutions such as Nabard.

As noted by Business Standard, the CD ratio has been climbing steadily because loan expansion continues to outstrip deposit accretion. Deposit growth has remained in single digits for four consecutive fortnights, while credit growth has stayed in strong double digits.

Business Standard pointed out that this divergence has persisted for months, barring a few brief pauses, the last noticeable one in March. Loan growth currently stands at 13.31% year-on-year.

The paper highlighted that banks have been grappling with a pronounced funding squeeze that has intensified in recent weeks, partly due to successive policy rate cuts by the Monetary Policy Committee between February and June, which together lowered the repo rate by 70 basis points.

To shore up deposit mobilisation, Business Standard reported that several lenders - including State Bank of India, ICICI Bank and HDFC Bank - have increased rates on select tenors, particularly short-term buckets. The report added that the MPC is expected to trim the repo rate further by 25 basis points in its upcoming policy review on Thursday.