Over the past year, bank credit has grown slightly faster than deposits, but the credit-deposit ratio has not moved in a straight line. It climbed to a peak in June, fell sharply through August, and then edged up again in September.

Deposits with scheduled banks stood at ₹281.75 trillion on September 15, 2026, up 17.2% from ₹240.44 trillion for the corresponding reporting period a year earlier. Bank credit, excluding inter-bank advances, stood at ₹228.38 trillion, up 17.9% from ₹193.78 trillion, according to the Reserve Bank of India's fortnightly data.

Source: RBI, Scheduled Banks’ Statement of Position in India

The difference in growth rate is small: credit grew 0.7 percentage point faster than deposits. But the ratio tells a more interesting story when tracked through the year.

Fall From June Peak

Source: RBI, Scheduled Banks' Statement of Position in India

The ratio rose from 82.3% at the end of April to 83.6% on June 15. It then fell almost 3 percentage points by August 31, before recovering to 81.1% on September 15.

The first thing to understand is that the ratio does not have to move in line with either credit or deposits. It depends on how the two move relative to each other.

The June peak is a good example. Between May 31 and June 15, bank credit barely increased, while deposits fell by about ₹1.53 trillion. Credit rose by only about ₹0.33 trillion. The ratio, therefore, increased even without a sharp acceleration in lending. That matters because a higher credit-deposit ratio does not necessarily mean that credit demand has suddenly strengthened. It can rise simply because deposits have fallen faster than credit.

The same distinction helps explain why the ratio fell sharply between June and August. A lower ratio does not necessarily mean weaker credit demand; it can also result when deposits grow faster than credit.

The ratio, thus, shows the relative movement of lending and deposits, not credit demand by itself.

September provides another useful example of why the ratio needs to be read carefully.

Between August 31 and September 15, both deposits and bank credit declined. Deposits fell by about ₹2.48 trillion, while bank credit fell by about ₹0.59 trillion.

Because deposits fell by more than credit, the credit-deposit ratio rose from 80.6% to 81.1%.

So the ratio increased, even though bank credit itself declined. This shows the credit-deposit ratio can change quite sharply without a corresponding acceleration or slowdown in bank credit.

The same pattern was visible earlier in the year. The ratio reached 83.6% in June, not because lending suddenly accelerated, but because deposits fell while credit barely moved. By August, the ratio had dropped to 80.6%, even though both credit and deposits were still growing compared with a year earlier.

In other words, the ratio is telling us something that the headline growth rates do not: the relationship between banks' deposits and lending has moved around considerably during the year, even though the year-on-year gap between the two remains relatively small.

When Does the Divergence Matter?
There is no single target credit-deposit ratio prescribed for the banking system as a whole. A higher ratio simply means that banks have more credit outstanding relative to their deposits.

The concern would arise if credit continued to grow faster than deposits for a prolonged period. Banks may then need to attract more deposits, use other sources of funding or adjust the pace and composition of lending.

The RBI's 2023-24 Annual Report described a similar dynamic, noting that deposit growth had remained below credit growth and that banks had used certificates of deposit to bridge the funding gap. That is not necessarily a problem. Banks do not fund their loans only through deposits. The more important question is what happens if the divergence persists and how banks choose to bridge it.

A lower ratio is not automatically a sign of healthier funding conditions either. It could reflect strong deposit growth, giving banks a larger funding base, but it could also reflect slower credit growth.

So, the ratio matters less as a number to be judged as “high” or “low”, and more as a way of understanding how lending and deposits are moving relative to each other.