Banks are lending more than they're collecting in deposits

India’s #banking sector is facing a quiet but serious challenge!
The Credit–Deposit (CD) ratio has crossed 100% on an incremental basis.
Simply put, banks are #lending more #money than the #deposits they are mobilising.

This is not a short-term blip; it is a structural stress building up.
What Is Causing This Stress?
The problem is not credit demand; the problem is deposit supply!
1️⃣ Money Is Moving Out of #SavingsAccounts
Large banks offer 2.5–3% interest
Under the New #Tax Regime, SB interest is taxed fully at the slab rate
Post-tax returns are minuscule, no incentive to park money!

2️⃣ #FixedDeposits Have Lost Their Appeal
FDs suffer from:
Falling interest rates, thanks to the Repo rate reduction
Taxation on an accrual basis
For anyone in the 20–30% tax bracket, FDs are: Safe, but inefficient.

3️⃣ Debt #MutualFunds Are the Natural Exit Route
As awareness has increased, Investors are moving to Debt Mutual Funds
Tax is paid only at redemption!
Overnight and liquid funds offer better post-tax efficiency!
This shift is visible in rising Debt MF AUMs and falling incremental deposits.

Money hasn’t left the system. It has just left banks!

Why This Matters?
When deposit growth lags credit growth:
- Banks rely on costlier sources of funds
- Margins get compressed
- Lending rates stay elevated
A high CD ratio is not a headline risk, it is a balance-sheet stress signal.

What the #Budget2026 Can Do to Fix This -
The solution is not higher interest rates; it is better tax alignment.
🔹 Bring Section 80TTA Into the New Tax Regime - Let the common man enjoy ₹10,000 of SB interest tax-free.
🔹 Expand Section 80TTB - Let all citizens enjoy tax-free interest from SB, FD, RD up to ₹50,000 and increase the limits for senior citizens!

These steps would:
- Improve post-tax returns on deposits
- Slow the migration to Debt MFs
- Stabilise bank funding

Depositors are responding to poor post-tax economics.
If taxation is not corrected, banks will continue to lend costlier money funded by shrinking deposits.
That is not sustainable!

Will our FM budge? Only time will tell!

What are the other options you can think of to mobilize cheaper funds for the banks?