New Delhi: Surging credit has caused the loan-to-deposit ratios (LDRs) to climb at Indian banks, raising concerns that the trailing deposit growth and competition for funds would hit margins, according to S&P Global Market Intelligence data and analysis.
Loan growth has stayed strong since the Indian economy recovered from the Covid-19 pandemic, but deposit growth lagged behind as Indian investors sought other asset classes.
These include stocks via direct investments and mutual funds as well as real estate, driven by India’s position as one of the world’s fastest-growing major economies. This has skewed the loan-to-deposit ratios (LDRs) at most banks, the analysis said.
LDRs at top public sector lenders, including the State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank of India and Canara Bank, increased almost every year since the 2021 fiscal, according to S&P Global Market Intelligence data.
While the ratio has declined marginally at some private sector lenders, this is largely because they were already operating at much higher levels of LDR.
