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The Indian banking system has made a strong post-pandemic recovery, with credit growth significantly outpacing deposit mobilisation over the past two decades, according to a report by SBI Research.

The study highlights a broad-based expansion in bank balance sheets and a rise in financial intermediation. Total bank deposits surged from ₹18.4 lakh crore in FY05 to ₹241.5 lakh crore in FY25, while advances increased from ₹11.5 lakh crore to ₹191.2 lakh crore during the same period.

The asset size of Indian banks expanded from ₹23.6 lakh crore to over ₹312 lakh crore. Banking assets now account for nearly 94 per cent of GDP in FY25, up from 77 per cent in FY21.

A key takeaway is the rise in the credit-deposit (CD) ratio, which climbed from 69 per cent in FY21 to about 79 per cent in FY25, reflecting strong credit demand amid relatively slower deposit growth. SBI Research cautioned that while higher CD ratios indicate improved financial deepening, persistently elevated levels could strain liquidity and increase reliance on market-based funding.

Public sector banks, after years of declining market share, are reclaiming ground in advances, supported by improved capital adequacy and balance sheet repair. At the same time, private sector banks have strengthened their low-cost CASA deposit base, while foreign banks have seen erosion in CASA ratios.

The report also flags risks from the sharp rise in unsecured lending, which expanded from ₹2 lakh crore in FY05 to nearly ₹47 lakh crore in FY25 and now accounts for about a quarter of total advances.

In addition, banks’ exposure to sensitive sectors such as real estate and capital markets has risen to around ₹50 lakh crore, or 27 percent of total credit. 

Regionally, credit deployment remains uneven. Southern and western states continue to post high CD ratios, often exceeding 90 per cent, while eastern and northeastern regions lag behind, indicating persistent gaps in credit absorption and economic development.

Overall, SBI Research said the Indian banking system is on a stronger footing, maintaining an optimal CD ratio.