Where Does Your Bank Deposits Go? You Could Be Funding India’s Growth Without Even Knowing It
- Remin Francis I R
- May 29
- 2 min read
Updated: Jun 16
India’s banking landscape hides surprising regional gaps. Which states lend far more than others? Discover what these credit patterns reveal about the country’s hidden growth opportunities.
Over the last two decades, India’s banking sector has undergone a significant transformation. While overall deposit and credit volumes have grown impressively, a deeper look through the lens of the Credit-Deposit (CD) Ratio reveals a story of regional divergence. This ratio, which reflects the extent to which local deposits are being used to fund local credit, serves as a proxy for economic vitality and financial inclusion across different parts of the country.
At the national level Credit-Deposit (CD) ratio has fluctuated, typically staying around 70-80%, indicating a healthy credit absorption relative to deposits. However, this headline number conceals sharp regional disparities. The Southern region stands out with a CD ratio above 100%, indicating it lends more than it saves. In particular, Andhra Pradesh has the highest CD ratio in the country, pointing to aggressive credit growth likely supported by funds mobilised from other states. Andhra Pradesh's Credit-Deposit Ratio of 153.5% in 2024 highlights its strong credit absorption capacity, meaning banks are lending significantly more than they collect in deposits within the state. This is possible because banks reallocate surplus deposits from other states, making Andhra Pradesh a net borrower in the national banking system. Such a high ratio typically reflects a vibrant, growing economy with strong demand for loans across sectors like business, agriculture, and personal finance. It signals active investment, economic expansion, and an attractive environment for banks to deploy capital efficiently.
In contrast, the Central and Eastern regions have CD ratios close to 50%, which means half of the deposits mobilised are not being reinvested locally. This underutilization suggests untapped credit potential and hints at either cautious lending practices or a lack of viable credit demand. States in these regions may be contributing significant savings to the national pool but are not seeing proportional reinvestment, potentially limiting local economic growth.
The Western and Northern regions display more moderate and stable CD ratios, both above the national average, indicating relatively efficient credit deployment. The North-East, while showing gradual improvement, still trails in credit absorption compared to other parts of the country, despite mobilising a respectable deposit base.
In summary, the CD ratio paints a revealing picture of India’s financial geography. Regions like the South and West can leverage their deposits effectively, fueling economic activity and growth. Meanwhile, the East, Central, and North-East regions remain underserved in terms of credit, despite holding substantial deposits. These credit-deposit mismatches highlight the need for targeted banking and policy interventions. Encouraging local lending, supporting MSMEs, and strengthening financial infrastructure can help balance capital flows and ensure that every region benefits from India’s economic progress. The CD ratio, more than just a banking metric, is a mirror of the country’s inclusive growth potential.
Want to read more?
Subscribe to finsightsbysquareleague.com to keep reading this exclusive post.
