A State Bank of India (SBI) research report has pointed to the sharp increase in unsecured loans and continuing concentration of deposits and credit in top 10 districts as potential risks to the banking system after analysing data from the sector in the last two decades.
The report also said that though both banking deposits and advances have expanded manifold over two decades, banks are dependent on a limited number of districts across the country for these key ingredients.
“Sharp rise in unsecured lending raises risk sensitivity…Unsecured advances expanded from Rs 2 lakh crore to Rs 46.9 lakh crore, with share rising to 24.5% in FY25 from 17.7% in FY05 underscoring potential credit risk accumulation,” the SBI research team led by chief economic advisor Soumya Kanti Ghosh said.
Since fiscal 2019, the share of unsecured loans in bank advances has been continuously above 20% with public sector banks (PSBs) accounting for half of the unsecured lending followed by private sector banks, the report said.
Banking deposits have increased from Rs 18.4 lakh crore in fiscal 2005 to Rs 241.5 lakh crore in fiscal 2025 which advances have increased from Rs 11.5 lakh crore in fiscal 2005 to Rs 191.2 lakh crore during fiscal 2025. Faster growth in credit means that the credit deposit (CD) ratio for the sector has also increased from 69% in FY21 to 79% in FY25.
Public Sector Banks’ (PSBs) market share loss has been arrested after showing a secular decline since FY 08, with trends now showing that PSBs are gradually reclaiming some lost ground indicating balance sheet repair and renewed lending appetite.
However, regional disparity in both deposits and advances has continued. SBI research found that southern, western and northern regions dominate high CD ratios, while eastern and north-eastern regions lag, SBI’s research showed.
“Some big States like Odisha, Bihar, Jharkhand & West Bengal…CD ratio is below 52%. There are 75 districts whose CD ratio is above 150 and 226 districts are there whose CD ratio is below 50. Around 46% of districts CD Ratio is within 50-100. Southern region districts CD ratio is better compared to other regions,” SBI research said.
The 10 districts hold around 43% of deposits and 49% of credit. While the top 100 districts hold deposits of 75% and credit of 77%. “In the top-25 districts of deposits, who are not in the top-25 credit districts are: Nagpur, Patna, North-24 Parganas, and Trivandrum. Similarly, there are 4-districts, namely Chandigarh, Indore, Ludhiana and Raipur are in the top 25-credit districts but not in the top 25-deposits districts,” the report said.
The report also said that though both banking deposits and advances have expanded manifold over two decades, banks are dependent on a limited number of districts across the country for these key ingredients.
“Sharp rise in unsecured lending raises risk sensitivity…Unsecured advances expanded from Rs 2 lakh crore to Rs 46.9 lakh crore, with share rising to 24.5% in FY25 from 17.7% in FY05 underscoring potential credit risk accumulation,” the SBI research team led by chief economic advisor Soumya Kanti Ghosh said.
Since fiscal 2019, the share of unsecured loans in bank advances has been continuously above 20% with public sector banks (PSBs) accounting for half of the unsecured lending followed by private sector banks, the report said.
Banking deposits have increased from Rs 18.4 lakh crore in fiscal 2005 to Rs 241.5 lakh crore in fiscal 2025 which advances have increased from Rs 11.5 lakh crore in fiscal 2005 to Rs 191.2 lakh crore during fiscal 2025. Faster growth in credit means that the credit deposit (CD) ratio for the sector has also increased from 69% in FY21 to 79% in FY25.
Public Sector Banks’ (PSBs) market share loss has been arrested after showing a secular decline since FY 08, with trends now showing that PSBs are gradually reclaiming some lost ground indicating balance sheet repair and renewed lending appetite.
However, regional disparity in both deposits and advances has continued. SBI research found that southern, western and northern regions dominate high CD ratios, while eastern and north-eastern regions lag, SBI’s research showed.
“Some big States like Odisha, Bihar, Jharkhand & West Bengal…CD ratio is below 52%. There are 75 districts whose CD ratio is above 150 and 226 districts are there whose CD ratio is below 50. Around 46% of districts CD Ratio is within 50-100. Southern region districts CD ratio is better compared to other regions,” SBI research said.
The 10 districts hold around 43% of deposits and 49% of credit. While the top 100 districts hold deposits of 75% and credit of 77%. “In the top-25 districts of deposits, who are not in the top-25 credit districts are: Nagpur, Patna, North-24 Parganas, and Trivandrum. Similarly, there are 4-districts, namely Chandigarh, Indore, Ludhiana and Raipur are in the top 25-credit districts but not in the top 25-deposits districts,” the report said.
