Deposit Growth Hits 15-Year High as RBI Downplays Credit-Deposit Ratio Worries

Bank deposits grew 17.8% in August, the fastest in 15 years, as RBI says credit-deposit ratio should not be viewed in isolation

PGurus Newsdesk

September 28, 2026

Bank deposits growing at a 15-year high: what the latest RBI bulletin reveals

NBFIs have overtaken commercial banks as the largest holders of government securities, the bulletin notes

India’s rising credit-deposit ratio does not, by itself, point to a funding constraint or vulnerability in the banking system, the Reserve Bank of India said in its latest bulletin, noting that banks remain well-capitalised and liquid even as credit growth continues to outpace deposits.

The numbers behind the ratio

The RBI said the credit-deposit ratio of scheduled commercial banks climbed from 68.6 per cent in September 2021 to 82.2 per cent in March 2026. The incremental credit-deposit ratio peaked at around 114 per cent in May 2026 before easing.

The central bank cautioned that the ratio should be read alongside banks’ broader balance sheets rather than as a standalone indicator of funding stress. It explained that deposits are created through several channels, including bank credit, investments and foreign capital inflows, and can also be affected by cash withdrawals, foreign transactions and other movements across the financial system.

What drove the rise

According to the RBI, a decline in banks’ investment-deposit ratio and an increase in bank capital contributed to the rise in the credit-deposit ratio. Foreign capital inflows, particularly through FCNR(B) deposits, later strengthened deposit growth and helped moderate the incremental ratio.

Aggregate deposits of scheduled commercial banks grew 17.8 per cent year-on-year as of August 31, 2026, the fastest pace in 15 years, the bulletin said. As of September 15, bank credit growth stood at 18.1 per cent, compared with deposit growth of 17.3 per cent.

Buffers remain strong

The bulletin noted that banks continue to hold robust liquidity and capital buffers, with a liquidity coverage ratio of around 125 per cent, gross non-performing assets at historic lows, and capital adequacy well above regulatory requirements.

The RBI also highlighted the growing role of non-bank financial institutions in government securities markets, saying they have overtaken commercial banks as the largest holders of government securities.

A broader view recommended

Looking ahead, the central bank said the credit-deposit ratio should not be used in isolation to judge the banking system’s ability to fund credit growth. A wider assessment covering deposits, capital, borrowings, investments, foreign assets and liquidity conditions would give a more meaningful picture. The report concluded that the current rise in the ratio coincides with a growing economy and a sound banking system, with prudential requirements being adequately met.

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