Root of C-D mismatch: Major banks aren't competing for savings deposits

The savings bank deposit interest rate was the last one to be deregulated by the RBI after all other interest rates were deregulated

Scheduled commercial banks (SCBs) are under increasing pressure to mobilise large deposits because the incremental credit-deposit (C-D) ratio has reached 98 per cent. The ratio is usually less than 80 per cent, as banks are required to maintain a cash reserve ratio of 4.5 per cent and a statutory liquidity ratio (SLR) of 18 per cent on their deposits. Banks usually hold excess SLR securities, allowing them to sustain the incremental C-D ratio above 77.5 per cent as long as these excess securities are available.

Before the current tightening in monetary policy began in May 2022, credit