Indian banks are now lending about ₹82 for every ₹100 they hold in deposits, the highest level ever recorded. This shift could change the interest you earn on savings.
What is the credit‑to‑deposit (CD) ratio?
The CD ratio compares the total amount a bank has loaned out with the total deposits it has collected. A ratio of 81.75% means banks have lent ₹81.75 for every ₹100 of deposits.
Why is the ratio climbing?
- Borrowing demand is strong – businesses and consumers are taking more loans.
- Deposit growth has slowed because many investors are moving money to higher‑yielding schemes, such as the government’s 7.10% three‑year small‑savings option.
- The RBI cut its policy rate by 125 basis points, prompting banks to lower the interest they pay on deposits.
How this affects deposit rates
With deposits becoming cheaper, banks have reduced the average rate on existing term deposits to 6.73%, the lowest since September 2023. New deposits are earning about 5.59%, the lowest level since October 2022.
What banks might do next
To keep lending while deposits stay tight, banks are looking at other funding sources, such as issuing bonds. Including bond borrowings in the CD ratio calculation could bring the reported figure below the 80% mark.
Bottom line for savers
Higher loan demand and slower deposit growth mean banks may keep deposit rates low for now. Keep an eye on any changes in bank deposit offers, especially if you rely on interest income.
Remember, this is perspective, not a prediction. Do your own research and consider your financial goals before making any decisions.