New Delhi, Jan 12: India’s banking system has witnessed a sharp post-pandemic revival, with credit growth significantly outpacing deposit mobilisation over the past two decades, according to a report by SBI Research.
The study highlights broad-based expansion in bank balance sheets, rising financial intermediation, and emerging structural risks linked to leverage and unsecured lending.
Key Highlights:
Total deposits rose to ₹241.5 lakh crore in FY25 from ₹18.4 lakh crore in FY05.
Bank advances jumped to ₹191.2 lakh crore from ₹11.5 lakh crore over the same period.
Banking assets surged from ₹23.6 lakh crore to over ₹312 lakh crore, bringing the sector’s size to nearly 94% of GDP in FY25, up from 77% in FY21.
Credit-Deposit (CD) ratio climbed from 69% in FY21 to 79% in FY25, reflecting robust credit demand amid slower deposit growth.
SBI Research cautioned that persistently high CD ratios could strain liquidity and increase dependence on market-based funding, even as they signal deeper financial intermediation.
Public sector banks (PSBs) are regaining market share in advances, thanks to improved capital adequacy and balance sheet repair, while private banks continue to strengthen their CASA deposit base. Meanwhile, foreign banks have seen a decline in CASA ratios.
The report also noted a sharp rise in unsecured lending, which surged to ₹47 lakh crore in FY25 from ₹2 lakh crore in FY05, now making up about a quarter of total advances. Banks’ exposure to sensitive sectors such as real estate and capital markets has increased to around ₹50 lakh crore, or 27% of total credit.
Regional trends show uneven credit deployment, with southern and western states posting CD ratios above 90%, while eastern and north-eastern regions lag behind, highlighting persistent gaps in credit absorption and economic development.
The report concluded that while India’s banking system is on a strong footing, maintaining an optimal CD ratio of 76–80% will be essential to balance growth with financial stability in the coming years.