Funding Stress Builds: India’s Loan-To-Deposit Ratio Hits Record 81.75%

Credit is growing faster than deposits, pushing India’s loan-to-deposit ratios higher. Banks are paying up for deposits and leaning more on wholesale funding.

India’s banks are running tight on funding buffers as deposit mobilisation trails loan growth. The banking system’s credit-to-deposit ratio climbed to a record 81.75% as on 31 December 2025, flagged in an Economic Times report published on 15 January 2026. 

This higher ratio signals lenders are deploying a larger share of deposits into loans, leaving less room for liquidity comfort. The trend has intensified competition for deposits, raised borrowing costs for banks, and increased reliance on market instruments like certificates of deposit to bridge the gap. 

What The Numbers Reveal About The Stress?

The growth gap is now visible in official weekly banking trends that markets track closely. A Reuters report dated 20 January 2026 said bank credit growth was 14.5% YoY in the fortnight ended 31 December 2025, while deposit growth lagged at 12.7% YoY for the same period. It also noted lenders were paying around 7.00% for 1-year funds, the highest so far in the financial year, despite the softer rate environment.

Bank-wise pressure is sharpest where loan books expanded faster than stable deposits. Times of India reported HDFC Bank’s credit-deposit ratio at about 98.7% in the December 2025 quarter, with the lender keeping deposit targets wide amid uncertainty.

Here are the core figures that explain why funding costs are climbing and why deposit acquisition has become the big banking battle.
 

With deposit growth not matching the pace of lending, banks are being pushed to choose between paying more for deposits, borrowing more from markets, or slowing loan growth.

How The Situation Built Up?

The funding squeeze has been building through FY26 as credit demand stayed firm across retail and business segments. Economic Times reported that total outstanding bank credit crossed ₹200 lakh crore for the first time on 31 December 2025, with 14.5% YoY credit growth around the same period, supported by policy tailwinds and improved demand conditions.

As deposits stayed tighter, banks increased their use of wholesale instruments. ETBFSI reported on 9 January 2026 that lenders were stepping up short-term borrowing via the certificate of deposit (CD) market as robust loan demand kept credit-deposit ratios elevated.

The same pressure shows up in deposit totals too. ETBFSI reported on 14 January 2026 that bank deposits rose 12.7% YoY to ₹248.6 lakh crore as of 31 December 2025, with commentary that adjusted growth could be lower after accounting for reporting-period effects.

Outside mainstream business dailies, a banking-focused explainer also highlighted the same concern. LoansJagat in a report published 27 January 2026 said retail and MSME credit remained strong, but “tight spreads and high CD ratio” were starting to pinch.

This is how the recent timeline stacks up across multiple newsrooms.
 

With inflation surprises and rate expectations shifting, banks are also watching how quickly funding costs cool. Reuters reported January 2026 retail inflation at 2.75% in a story published 12 February 2026. 

What Bankers And Analysts Are Saying?

Bank treasury teams told Reuters on 20 January 2026 they wanted longer-tenor bulk deposits because short-term funding has turned expensive, and rollovers are harder to manage at scale.

On the lender side, HDFC Bank signalled a cautious stance on deposit growth planning, as reported by Times of India on 10 January 2026, reflecting the uncertainty around funding mix improvement.

Market watchers also see pass-through challenges. An Upstox Originals report published 12 February 2026 said deposit constraints can slow rate transmission even in an easing cycle.

Conclusion

India’s loan-to-deposit ratios are rising because credit growth is staying ahead of deposits. Banks are likely to keep chasing deposits aggressively while using more wholesale funding to support loan demand.