Published on January 06, 2026 | By LoanPao Team
Indian banks' loan-to-deposit ratio (LDR) has reached a record high of around 81% in the December 2025 quarter, highlighting a growing mismatch between credit expansion and deposit growth. This trend has sparked concerns about liquidity pressures and potential impacts on lending practices. In this analysis, we explore the causes, implications for borrowers, and what it means for your loan plans in 2026.
Understanding Loan-to-Deposit Ratio (LDR)
LDR measures the proportion of deposits used for lending. A high LDR (above 80%) indicates banks are stretching their deposit base to fund loans, which can lead to liquidity risks if deposits slow further.
Current LDR Trends in Indian Banks (Q3 FY26)
| Bank | LDR (%) | Loan Growth (% QoQ) | Deposit Growth (% QoQ) |
|---|---|---|---|
| System Level | 81 | 3.5 | 2.8 |
| HDFC Bank | 98 | 2.7 | 2.1 |
| Other Major Banks | 80-85 | 2-4 | 1.5-3 |
incremental LDR hit 102% in 2025, meaning loans grew faster than deposits.
Why LDR is Rising: Key Causes
- Strong Credit Demand: Retail loans (home, personal) and corporate borrowing surged amid economic recovery.
- Slow Deposit Growth: Savers shifting to mutual funds/stocks for higher returns; fixed deposit rates not competitive.
- RBI Policy: Repo rate cuts encouraged borrowing but not deposits.
Implications for Banks & Economy
Banks may:
- Hike deposit rates to attract funds
- Slow loan growth to balance LDR
- Face RBI scrutiny if LDR >90%
What This Means for Borrowers in 2026
- Higher Loan Rates: Banks may not fully pass RBI rate cuts, keeping lending rates elevated.
- Tighter Eligibility: Stricter credit checks, higher CIBIL requirements.
- Delayed Approvals: More scrutiny on loan applications.
- Opportunity: Shop for competitive rates from banks with lower LDR.
At LoanPao, we help compare options from multiple banks for best deals. Check your eligibility today!