Deposits and advances expanded manifold over two decades (FY05-FY25), with deposits and advances surging from ₹18.4 lakh crore to ₹241.5 lakh crore and from ₹11.5 lakh crore to ₹191.2 lakh crore, respectively, signaling scale expansion of the banking system, according to a report by SBI’s economic research department (ERD).
However, the speed of expansion has been much faster in the case of advances. The Credit-Deposit (C-D) Ratio increased from 69 per cent in FY21 to 79 per cent in FY25.
The ERD economists cautioned that the sharp rise in unsecured lending raises risk sensitivity. Unsecured advances expanded from ₹2 lakh crore to ₹46.9 lakh crore, with share rising to 24.5 per cent in FY25 from 17.7 per cent in FY05, underscoring potential credit risk accumulation, per their analysis.
They underscored that ASCBs (all scheduled commercial banks) contingent liabilities has soared at an unexceptional pace and grew from ₹28.3 lakh crore in FY05 to ₹505.5 lakh crore (an increase of almost 18 times). The share of liability on account of outstanding forward exchange contracts is almost 93 per cent of total contingent liabilities
“Indian banks have exhibited strong post-pandemic balance sheet revival. Bank asset growth rebounded sharply after FY21, rising from 77 per cent of GDP to 94 per cent by FY25, reflecting renewed credit intermediation and financial deepening,” per the ERD economists.
They noted that exposure to sensitive sectors (such as commercial real estate) continues to rise and currently has reached ₹50 lakh crore (almost 27 per cent of total advances). Of the total exposure to sensitive sectors (FY25), 50 per cent share is attributed to Private sector banks followed by PSBs at 47 per cent.
“Public Sector Banks’ (PSBs) market share shows continued revival. After a secular decline since FY08, PSBs gradually reclaiming advances market share, indicating balance sheet repair and renewed lending appetite,” the report said.
The economists observed that CASA (current account, savings account) stability masks divergent trends across bank groups. While overall CASA ratios remained around 37%, private banks strengthened CASA shares whereas foreign banks witnessed erosion.
Further, there is gap between maturity profile of share of deposits and advances for 6 months to 1 year (with 16 per cent of the deposits maturing against 9.8 per cent of the loans getting paid off) and 1-3 year (with 24 per cent of the deposits maturing against 35.1 per cent of the loans getting paid off) time bucket.
The 35 per cent share of advances in 1-3 years bucket indicates increasing tendency of pre-payment among borrowers.
Capital adequacy improved across most PSBs, with the CRAR (capital to risk-weighted assets ratio) levels increasing for almost all PSBs between FY21 and FY25. While the CRAR level is high for Private sector banks, a few of them (8 out of 21) seen decline in in FY25 over FY21.
“Our threshold regression estimates indicate optimum CD ratio at 76–80 per cent for PSBs and private banks and 65–70% when foreign banks are included…beyond which profitability gains diminish sharply indicating excessive leverage reduces the incremental profitability of banks,” the economists said.
The report noted that Banking employment nearly doubled over two decades. Total employees increased from 8.6 lakh to 18.1 lakh, with private banks accounting for 46 per cent and PSBs 42 per cent. Officer share rose from 36 per cent to 76 per cent indicating skill intensification and preference for higher-value roles.
Published on January 12, 2026
