Union Budget 2026-27: Credit rises amid improvement in asset quality

Rising credit-deposit ratios are straining bank liquidity even as RBI data shows NPAs falling largely due to write-offs, not recoveries

Challenges

• Banks stepped up lending after FY21, though too much C D ratio, particularly for private sector banks may create liquidity problems
• 'Write Offs' major factor for lower NPAs, say RBI reports

Takeaways

• High C D ratios are pushing banks to raise deposit rates and seek alternative funding sources to meet growing credit demand
• RBI data shows Indian banks’ gross NPAs fell to multi-decade lows not primarily because of recoveries and upgrades