THE NEXT CHALLENGE: DEPOSITS, NOT BAD LOANS

THE NEXT CHALLENGE: DEPOSITS, NOT BAD LOANS For the longest time, if you asked any banker what kept them up at night, the answer was always the same—bad loans. Cut to 2026, the balance sheets are cleaner than ever, and the crisis isn’t about the money going out and not coming back, but about the money that’s refusing to come in—deposits. And it’s a bigger problem than you might think. Let’s dive in:

CREDIT-DEPOSIT MISMATCH Everyone wants a loan—for cars, homes, or businesses. But banks need deposits to match credit demand. The Credit-Deposit (CD) ratio is now at a 20-year high of 82%. So, for every ₹100, banks have already lent out ₹82. After the mandatory reserves they keep with the RBI, there’s very little spare cash left behind.

WHERE IS THE MONEY GOING? Between FY20 and FY25, the number of unique equity investors exploded from 31 million to over 110 million. Indian households have realised that FDs do not build wealth and are shifting to equities and investment funds.

RBI PRESSURE When RBI cuts the repo rate, interest rates on deposits are slashed further, making them even less attractive.